reporters hacked into the phones of any other crime victims? >> no, i had not been made aware of that. >> okay. just for the recordthough you answered my colleague, jim sheridan, earlier, you will be aware that it is of lively interest to regulators in the united statesthe actor jude law is apparently alleging that his phone was hacked on us soil. given that allegation, are you absolutely confident that no employee or contractor of news corp or any of its properties hacked the phones of 9/11 victims or their families? .

[captions copyright national cable satellite corp. 2011] [captions copyright national cable satellite corp. 2011] >> is there any information provided to you so far? have you received any

information that they may have indulged in that kind of hacking? >> no. we have only seen the allegations made in the press. i think it was in the "mirror" or something like that, and we were actively trying -- we'd like to know exactly what the delegations are and we want to understand everything about that. >> have you received any reports of hacking? >> definitely not. >> thank you. >> despite the fact it has been a shock to your corporate culture, have you received any other indication that your australian properties or any of the territories where newscorp owns media property?

>> i haven't heard of that allegation, but i would go back to the code of conduct in all of our agencies, be they journalists or analysts, they are required to have when they join the company and are briefed on those things. it is a matter of ethics. and certainly something on a global basis that we want to be consistent, and we want to be doing the right thing. when i say illegal behavior has no place in our company, that goes for the whole company. >> you are a head of the global company, the buck stops with you. you said this was the most humiliating day of your life.

that was a mistake. the most humble day of your life. you feel humbled by these events. given your shocks about these things being laid out before you and the fact you didn't know anything about them, had you instructed your editors around the world to engage in an investigation to ensure this wasn't being replicated around the globe? if not, will you do so? >> no, but i am more than prepared to do so. >> thank you. >> one final section. you touched earlier, mr. james murdoch, you touched generally on the general culture of phone harking and illegal -- hacking and illegal practices that have happened in this country. pierce morgan who is not a celebrity anchor at cnn, you do not appear to have asked him any

questions about phone hacking. he said, and i quote, that little trick that allows anyone to call messages. he opened that using that little trick enabled him to win "scoop of the year" on a story about americans. that was a story in the "daily mirror" about phone hacking. yesterday there was someone posting about their practices at the "daily mirror." what they said to parliament is that "the daily mail" has never run a story on phone hacking in anyway.

50 journalists obtained information by the founder who has used, some, shall we say, unorthodox methods. is it not the truth of the matter that the news of the world is entitled to go out there reestablish the section of phone hacking because that was part of the general culture of corruption in the british tabloid press, and they didn't kick it up the chain to you? is that the fact of the matter? >> i am aware of those reports. all i can speak to in sth matter

is the behaviors and the culture at the "news of the world" as we understand it, how we are trying to find out what really happened . it is not for me to impugn other newspapers. >> because it was so wide in british journalism, because it was so widespread. >> if a television or news operation feels that they don't have to hold themselves to a higher standard -- you know, i think it is important that we

don't say, listen, everyone was doing it, and that's why people are doing this. at the end of the day, we have to have a set of standards that we believe in, and we have to have titles and journalists who operate at the highest possible standard. we have to make sure that when they don't live up to that, that they are held to account. that's really the focus for us. >> mr. rupert murdoch, have you considered suing harbottle & lewis? you said in the past -- in one of your first answers to my colleague, tom watson -- that you relied on the investigation by the police, the investigation by the press complaints commission, and the investigation undertaken by your solicitors, harbottle & lewis, under whose care this enormous pile of documents was found. there is an old saying, that if you want something doing, you should do it yourself. in this case, you relied on three sets of people, all of

whose investigations were severely lacking. have you considered suing harbottle & lewis? >> any future legal claims or actions in any matter are a matter for the future. really, today, this is about how we actually make sure that these things don't happen again. i won't comment or speculate on any future legal matters. >> ok. the file of evidence, you were asked by my colleague, mr. farrelly, whether you had read it yourself and you said no. in the circumstances, where you have rely on other people and advisers and they have severely let your company down, you do not think, mr. murdoch and mr. rupert murdoch, that you ought to take the time and read through everything in that followeder personally? >> for claret, mrs. mensch, i

did say that i did read some of the con teantstents. they were shown to me. and what i saw was sufficient to know that the right thing to do was to hand them over to the authorities and help them with their investigations. >> i understand that. but you were shown a representative simple, which can be tricky -- sample, which can be tricky. in the circumstances and given the enormous damage which i am sure you will be the first to admit has been done to news corp, do you not think that, senior executives in the company, you should take the time and read the entire file? is it not the case that you are the captain of the ship? you are the chief of news corp? >> it is a much bigger ship. >> yes, but you are in charge of it. as you said in earlier questions, you do ng consider yourself a hired chief

executive. you work 10 to 12 hours a day. do you think, mr. mur dock, that a-- >> no. >> why not. >> have you considered resigning? >> no. >> why not? >> because i feel that the people i trusted -- i'm not saying who and i don't know at what level have let me down. >> thank you, mr. murdoch. as i said, i appreciate your immense courage in having seen this session through, despite the common assault that just happened to you. thank you. >> i will allow mr. watson a

brief question. >> james, when you signed off the taylor payment, did you see or were you made aware of the full neville e-mail, the transcript of the hacked voice male messages? >> no. i was not aware of that at the time. >> but you paid a large sum, and there was no reason to. >> there was every reason to settle the case. >> if taylor and clifford are prepared to release their obligation to confidentiality, will you release them from their confidentiality clause so that we can get to the full facts of those particular cases? >> i cannot comment on the clifford matter at all. i was not involved in that matter. as to the taylor matter, it is a confidential agreement. i do not think that it is worth exploring hypotheticals. >> if he removes himself from an obligation, if he allows his papers to be released, will you

let -- >> mr. watson, it is a hypothetical situation. i'm happy to correspondent. >> why? do you want me to carry on with a few more questions so i can get to the end of this? >> i am getting galled. we have covered this at some considerable length. >> actually, chairman, we have not, but i respect you. mr. murdoch, your wife has a very good left hook. >> mr. murdoch, did you ask if you could make a closing statement. the committee are entirely content for you to do so. >> thank you, mr. chairman. members of the committee, i would like to read a short statement now. my son and i came here with great respect for all of you, for parliament, and for all of

the people of britain, whom you represent. this is the most mumble day of my career. after all that has happened, i know that we needed to be here today. james and i would like to say how sorry we are for what has happened, especially with regard to listening to the voicemale of victims of crime. my company has 52,000 employees. i have led it for 57 years, and i have made my share of mistakes. i have lived in many countries, employed thousands of honest and hard-working journalists. i own nearly 200 newspapers of very different sizes, and i have followed countless stories about people and families around the world. at no time do i remember being as sickened as when i heard what the dowler family had to endure, which i think was last monday week. nor do i recall being as angry as when i was told that the news

of the world could have compounded their distress. i want to thank the dowlers for graciously giving me the opportunity to apologize in person. i would like all the victims of phone hacking to know how completely and deeply sorry i am. apologizing cannot take back what has happened. still, i want them to know the depth of my regret for the horrible invasions into their lives. i fully understand their ire, and i intend to work tirelessly to merit their forgiveness. i understand our responsibility to cooperate with today's session, as well as with future inquiries. we now know that things went badly wrong at the "news of the world."

for a newspaper that held others to account, it failed when it came to itself. the behavior that occurred went against everything that i stand for, and my son, too. it not only betrayed our readers and me, but also the many thousands of magnificent professionals in other divisions of our company around the world. let me be clear in saying, invading people's privacy by listening to their voicemail is wrong. paying police officers for information is wrong. they are inconsistent with our codes of conduct, and neither has any place in any part of the company that i run. but saying sorry is not enough. things must be put right. no excuses. this is why news international is cooperating fully with the police, whose job it is to see that justice is done.

it is our duty not to prejudice the outcome of the legal process. i am sure the committee will understand this. i wish that we had managed to see and fully solve these problems much earlier. when two men were sent to prison in 2007, i thought this matter had been settled. the police did their investigations, and i was told that news international conducted an internal review. i am confident that when james later rejoined news corporation, he thought he f the case had closed, too. these are subjects you will no doubt wish to explore and explored today. this country has given me, our companies, and our employees, many opportunities. i am grateful for them. i hope our contributions to britain will one day also be

recognized. above all, i hope that we will come to understand that the wrongs of the past, and prevent them from happening again. and in the years ahead p. restore the nation's trust in our company and in all british journalism. i am committed to doing everything in my power to make this happen. thank you. >> thank you. on behalf of the committee, i thank you for giving up so much of your time for coming here this after. i would like to apologize again for the unacceptable treatment you received from a member of the public. >> thank you, mr. chairman and all members. >> thank you, mr. chairman. >> the committee will now have a break of five minutes before we move' next part.

>> that same day the committee also heard from rebekah brooks. a week ago she was arrested and questioned about her knowledge of phone hacking and police bribing. this portion of her testimony is about 25 minutes. >> there are many questions i would like to ask you. >> when we made the very regrettable decisions at news of the world after 168 years, he has predominantly been a news of the world lawyer.

we had appointed new lawyers. he left. we have standards we set up. i won't go over it again. you recently talked about it. there are people dealing with it.

>> it has been a busy day. as a journalist and editor of "news of the world" how extensively did you work with private detectives? >> i think only somewhat. in relation to privacy, i think back then we answered extensively about the use of private detectives. i think on the tape was the "take a break" magazine.

certainly in the top five were "the observer," "the guardian," "news of the world," "daily mail." >> chairman, may i interrupt? i declare that i used to work for "the observer," but left in 2001. the "observer" was not in the top four. >> perhaps the top six. >> "the observer" had four instances. >> but it was not -- but it was on the table. >> to answer my question, you extensively worked with private investigators. is that the answer? >> no. what i said was that the use of the private detectives in the late 1980's -- 1990's and 2000

was a practice of fleet street and after operation motorman and "what price privacy now?" fleet street reviewed this practice and in the main in the use of private detectives was stopped. >> for the third time, how extensively did you work with private detectives? >> "the news of the world" employed private detectives like most newspapers in fleet street. >> is it fair to say that you were aware of and approved payments to private detectives? >> i was aware that "news of the world" used private detectives under my editorship, yes. >> so you would approved payments to them? >> that's not how it works, but i was aware we used them. >> who would have approved the payments? >> the payments system in newspaper, this has been discussed at length, is simply

that editor's job is to acquire the overall budget for the paper from the senior management. once the budget is acquired, it is given to managing editor to allocate to different departments. >> so stuar kuttner would have discussed some payments to private detectives with you? >> not necessarily, no. he may have discussed payments with me, but i don't particularly remember any incidents. >> so you don't recall whether you authorized payments or talked with stuart kuttner. >> the payment would have gone through the managing editor. >> you can't remember whether stuart kuttner ever discussed it with you? >> sorry. what? >> you can't remember whether he

kuttner discussed it with you? >> no. >> in your letter to us in 2009 you said that you did not recall meeting glenn mulcaire. did you -- you lu will appreciate that this is an inadequate answer in the circumstances, and that we now require a specific response to our questions. did you have a contact with glenn mulcaire? >> no, none whatsoever. >> would your former diary secretary, michelle, be able to confirm that? >> michelle? >> your former diary secretary? >> we had a p.a. for 19 years called cheryl. >> would your p.a. be able to confirm that? >> absolutely. >> does she hold your diary for the past 19 years? >> no, she probably doesn't. i keep that for 19 years, but she may have something from back

then. i don't know. >> would it be in a paper format or electric fronic format? >> i did not meet mr. mulcair. >> i am talking about your diary. >> to it would have been in paper format until recently. >> did you as editor, did anyone bring you information as a result of glenn mufment lcaire's methods? >> i know it is an entirelyly good question, but i can only keep saying the same answer. i didn't know glenn mulcaire. there were other private investigators i did know about and have heard about, but he wasn't known about them. >> do you suspect that you might have received information as a

result of glenn mulcair's methods? >> i know it is an entirely appropriate question, but i can only keep saying the same answer. glenn mulcaire, as i am aware, worked on and off with the "news of the world" i think in the late 1990's and continued through until 2006 when he was arrested. obviously, if he worked for the "news of the world" for that time, he was involved. i think the judge said in 200 7 when glenn mulcaire was arrested that he had a perfectly legitimate contract with the "news of the world" for research and investigative work.

the judge said that repeatedly throughout the trial. that's all i can tell you. >> did you ever have any contact directly or through others with jonathan rees? >> no. >> i heard a lot recently about jonathan rees. i watched the "panorama" program, as we all did. he wasn't a name familiar with me. i am told that he rejoined the "news of the world" in 2005 or 2006, and he worked with the "news of the world" and many other newspapers in the late 1990's. that is my information. >> do you find it peculiar that having served a sentence for a serious criminal offense, he was then rehired by the paper? >> it does seem extraordinary. >> do you know who hired him? >> no, i don't.

>> do you know who signed his contract? >> no, so sorry. have -- >> if you have been conducting an investigation for six months, did you not take the time to find out? >> the investigation that we have been conducting over the six months is particularly around the intercept of voicemails as you know. the management and standards committee at news international is going to look at jonathan rees and we already do have some information. >> what information do you have? >> we have information that rees worked for many newspapers in fleet street in the late 1990's and that he was rehired by "news of the world" sometime in 2005, maybe 2006. >> do you know what he was doing at that time? >> no. >> you did not ask? >> well, i was editor of "the sun" at the time. >> did you not wonder given the fact you have a hacking scandal breaking around you?

>> absolutely. i have the information that "panorama" has. in the program it says he was conducting many, many illegal offenses. that is what i saw, as you did. also he used to work for "panorama" and he was rehired by "news of the world. " >> do you believe he conducted illegal activities on behalf of "news of the world"? >> what is your belief? >> i don't know. >> you donet know what he did? >> i don't know what he did. >> do you not think people would find it incredible that you don't know -- that as chief executive of the company, you don't know?

>> it may be incredible, but it is the truth. >> did you ever have any contact with steve whittamore? >> yes. >> what did you do with him? >> he was one of the private akts detectives who i think formed the major part of operation motorman. >> i want to know what you did with him. >> sorry? >> i want to know what you did with him. >> in the main, my investigative -- my use of private investigators while i was editor of the "news of the world" was purely legitimate and it -- in the pursuit of the main, as you know, for the addresses and whereabouts of convicted peed files through law. that is my majority, if not almost all of my exclusive use of private investigators.

>> are you aware that steve whittamore conducted two exdirectly look-ups on the dowler family in walton-on-thames? >> i was not aware of that until two weeks ago. >> you are not. >> yes. >> why do you hold a mobile conversion from steve whittamore? >> as i said, it was 11 years ago. i have answered this question many times, but to repeat, a mobile conversion is finding an address from a mobile phone and it can be got through legitimate means. in fact, in the story that you refer to, the mobile phone number was a business number and the address was widely known. >> so you can remember the story. >> i have just said to you that i can. >> what was the story you were working on? >> i read it in "the new york

times." " >> was that a pedophile that you were after then? >> it would be unfair to the person concerned, because he has been named by "the guardian" and "the new york times" but i am saying that the very few occasions on which i used a private detective were on law. >> can you nainl the other private detectives you worked with? >> no. >> you cannot remember them? >> no. >> are you aware of the -- that the paper used detectives though? >> sorry. why did the paper use private detectives other than steve whittamore, jonathan rees, and glenn mulcaire? >> he was the one that i was aware of. >> one other question. do you have any regrets? >> well, of course i have regrets. the idea that milly dowler's

phone was being accessed by someone being paid by "news of the world" or even worse, authorized by someone at the "news of the world" is horrible to me as it is to everyone in the room. we have tried to get down to the bottom of this investigation. the investigations have been too slow. i think james and rupert accepted that earlier. they are endeferring now to let the company investigate. but of course, there are regrets. >> i would like to draw you on a question that i put to mr. james murdoch at the end of our last session. on the wider culture of hacking, bribe -- and bribing private detectives on fleet street, to what extent did the "news of the world" feel justified in its

internal culture in using those practices because everybody was doing it? he said he won scoop of the year for a story about ulrika jonsson, and sven-goran eriksson. he actually gave a two toral on how one access yizzes by voicemail by punching in a set of default code. clearly, from the account that he gives, he did it routinely as editor of the "daily mirror." it was something that happened at the "daily mirror." he was of course also an exemployee of news international. we have been talking about operation motorman and the different amount of use tcha was

made by steve whittamore by various members of fleet street. is it not obviously the case then that blagging, hacking, and the use of private investigators for illicit and lift purposes was an absolute culture on fleet street and that the "news of the world" participated in its legal activities maybe with a sense of entitlement as morgan shows in his book because everybody else was doing it? is that not the case? >> i think we have heard enough over the past 10 years, but particularly i think this committee held an inquiry that was incredibly extensey. every editor on fleet street was called to this committee. as far as i was concerned, the failings of all newspapers in not understanding the extent of use of private investigators

across fleet street was held to account then. there were many changes because of operation motorman to be data protection act. i think about three months ago they were sort of addressing, again, readdressing that climate then and how different it is now. >> the committee in 2003 concluded there were widespread evidence of despicable practices across the media, including blagging and payments to the police. i appreciate the legal sensitivity, but i'll put it to you anyway. in your evidence to the committee in 2003 you were asked if you had paid the police, and you clearly said, "we have paid the police in the past."

may i suggest to you that the manner in which you said that. it implied that so do all the tabloid newspapers. i am not asking you to make specification allegations, but in your general knowledge, were payments to the police widespread across fleet street or were they confined to news international titles? >> if you remember, the evidence that i gave in 2003 was i was going to explain my comment. as you know, mr. bryant asked me to explain my comment. in 2003 straight after my comment about payment to police it was clarified. i think les hinton, who was the chairman of the news international, at the 2007 -- in

the past payments had been made to police, i was referring to -- in fact, in my experience of dealing with the police, the information they give to newspapers comes free of charge. >> mr. dacre, in evidence to a parliamentary committee yesterday, stated that to his knowledge "the daily mail" has

never published a story based on hacking or blagging. do you think it credible that all those 1,300-plus transactions were licitly obtained? or is there wider culture of hacking and blagging of which your paper was part? >> i did not see that evidence. you will have seen that, out of all media groups in the country, news international has been the one openly to welcome prime minister's public inquiry. the fact is, i am not in a position to comment often all other newspaper groups. like i said at the beginning, things went badly wrong at the "news of the world." we are doing our best to sort it out. i accept that it is not at the speed with which this wee committee would have wished, but we are trying to put them right. on operation motorman, it is important that there was a select committee inquiry into

it. it is rorlly right that the code of conduct of journalists and the ethics of journalism are in constant review. if there is ain constant review of conduct of ethics, the freedoms that this press enjoys, which i believe in very strongly, are at risk. >> one final question. your previous letters to the committee when you refused to attend placed great emphasis on

your being willing to attend as part of a panel of newspaper editors, all of whom had been identified with operation motorman. in other words, you appeared to emphasize that whatever happened in the "news of the world" it was part of the wider culture. you seem to know or imply that these practices were going on elsewhere. how could you not be aware that they were going on endemically at the "news of the world"? and do you not regret that you did not yourself undertake some kind of root and branch investigation into the "news of the world"? rather than waiting for these things to drip out over the fullness of time? >> just going back to 2002, with all the changes at the data protection act, the fact is there was a root and branch change as a result of the select committee. i can say absolutely that "the

sun" is a very clean ship. >> thank you. >> up next, representative john larson. "newsmakers" today at 6:00 p.m. eastern on c-span. >> what would it have been like in life to have met these people when you didn't know the ending? >> devil in the white city investigates hitler in -- "devil in the white city" author investigates hitler in "in the garden of the beasts." erik larson's story of mystery and intrigue tonight on "q & a." >> it takes a behind the stacks look. the "l.a. times" calls it

mystery. "the library of congress, behind-the-scenes of the world's largest library" sunday night at 9:00 eastern on c-span. >> david cameron in the house of commons. mr. colson was a former editor of news of the world and was arrested and questioned on his knowledge of phone hacking and police priberi -- bribery. the prime minister said with hindsight, he would not have chosen mr. coleson. this portion is just over an hour and begins with the speaker's statement beginning with an attack on rupert murdoch beginning the day before.

>> i want to comment on what happened yet. it is wholly unacceptable for a member of the public to treat a witness in this way. it is all the more regrettable when this should happen when the work of this house and this committee has hurt its reputation. i have set in an investigation into what took place, the reasons for the security failure, and -- order. and the lessons to be learned. this investigation will be

entirely independent of the house authority. statement from the prime minister. >> with permission, i would like to make a statement. >> this has shaken people's trust in the media and the leg at of what they do, in the police and their ability to investigate media malpractice, and yes, in politics and in pligs ability to get to grips with this issue. people desperately want to put a stop to the illegal practices to ensure the independence and effectiveness of the police. and to establish a more healthy relationship between politicians. above all, they want us to act on behalf of the victims, people who have suffered dreadfully, including through murder and

terrorism, and who have had to relive their agony all over again because of phone hacking. the public want us to work together to sort this problem out, because until we do so, it will not be possible to get back to the issues they care about even more. getting our economy moving, creating jobs, helping with the coost of living. protecting us from terrorism, and restoring fairness our welfare and immigration stism. let me set out the action that we have taken. we now have a well-led police investigation which would examine criminal behavior by the media and corruption in the police. we have set up a wide-ranging and independent judicial inquiry to establish what went wrong, why, and what we need to do to ensure it never happens again. as the first prime minister to publish meetings with media editors, to bring transparancy

to the relationship between government ministers and the media stretching right back to the general election. and the house of commons by speaking so clearly about this revull shun at the phone hacking allegations hopes to cause the end of the news corp bids. today i would like to update the house on the action that we are taking. first on the make-up and remake of the public inquiry, second on issues concerning the police service, and third i will answer, i'm afraid, mr. speaker, at some length all of the key questions that have been raised about my role and that of my staff. the judicial inquiry and the panel of experts who will assist it. those will be the former chief counselor.

the former editor of "the daily telegraph" george jones. and the former chairman of the "financial timets." david bell. these people have been chosen not only for their expertise in the media, broadcasting, regulation, and policing, but for their complete independence from the interested pearts. -- parties. mr. speaker, i also said last week that the inquiry will proceed in two parts. i set out a draft term of reference. we con sulted with lord justice leverson. with chairs of relevant select committees. i also sent it off to the family . we made significant amendments to the remit of the inquiry. without allegations that the problems of the press and the

police goes wider, we have agreed to other relevant forces will now be within the scope of the inquiry. we have agreed that the inquiry should consider not just the relationship between the press, police, and politicians but their individual conduct, too. and we also made clear that the inquiry sl look not just at the press, but other media organizations including broadcasters and social media if there is evidence they have been involved in criminal activities. lord justice leverson and the panel will get to work immediately. he will aim to make a report on the first part of the inquiry with untold results. there should be no doubt. this public inquiry is as robust as possible, it is fully relevant, and he will be able to summon winds under oath. mr. speaker, let me turn to the extraordinary events we have seen over the past few days over

britain's largest resource. the met p i want to thank him for the work he carried out over many, many years in london and elsewhere. on monday, commissioner john yates also resigned. i want to express my gratitude for the work he has done, especially in improving our response to terrorism. given the sudden departure to two such senior members, there pluft be confidence in that policing. i ask the home secretary and mayor of london to ensure that the responsibilities of the met will continue seamlessly. tim godwin who stood in when he was well will shortly do so again. the vital terrorism job will be taken on by the highly experienced -- the responsibilities of the debt commissioner i which the house will remember, includes general oversight of the vital

investigations both into hacking and into the police, operations will not be done by someone inside the met, but instead by bernard who will join temporarily from her majesty. we are also looking to speed up the process for selecting and appointing the next commissioner. we cannot hope a change in personnel at the top is enough. the simple fact is that the whole affair raises huge issues about the ethics and practices much our police. let me state plainly, the vast overweight our police officers are beyond reproach. police corruption must be rooted out. they are charged with doing just that. i believe we can and must do more. put simply, there are two problems. first a perception that when problems arise, it is still the police investigating the police. sec, a lack of transparancy when

it comes to police contact. we are actually on both. these are precisely the two points that my right noble secretary addressed in her statement to this house on monday. we believe this crisis calls for us to stand back and take a broader look at the whole culture of policing in this country, including the way it is led. at the moment, the police system -- there are too few and arguably too similar cabinet positions for the top jobs. i want to see radical proposals how we can open up our police force. the government is introducing electricitied commissioners and crime commissioners ensuring there is an individual he -- >> we need to see if we can extend that to the operational side, too. why should all police officers start at the same level? why shouldn't someone with a different skill set be able to

join the police force in a senior role? why shouldn't someone who has been a proven success overseas be able to help us turn around a course here at home? i believe these are questions we should ask to get the stronger corporate governans. finally let me turn to the specific questions i have been asked in recent days. first it has been suggested that my chief of staff was behaving wrongly when he didn't take up yates offer to be briefed on questions of phone hacking. i have said they should arrest exactly who they wish. that is what they have done. there was an investigation, and

it shows my staff behaved correctly. it would not be ok to give my staff any privileged briefing. the reply that he set was cleared by my secretary, jeremy hayward. just marges mr. speaker, if they had done the opposite. if they had offered or acquiesced in receiving privileged information even if there was no intent to use it. there would have been justified outrage. any perception that number 10 was risking a police investigation into anyway would have been completely wrong. mr. yates backed his judgment yesterday. in deed, as john yates said, the offer was properly and understandably rejected.

the countersecretary has cracked that, too. now there is a question as to whether the ministerail code was broken with meetings of news international objectives. the cabinet has ruled clearly that the code was not broken. not least because i asked to be entirely excluded from the decision. next, i would like to set the record straight. another question yesterday, whether the conservative party also employed neil wallace. they have confirmed to me that neither neal wallace nor his company has ever been employed by nor contracted by the conservative party, nor has the conservative party made payments to either of them. it has been drawn to our attention that he made have provided some informtive advice

before the election. to the best of my knowledge, i did not know anything about this until sunday night. as with revealing this information, we will be entirely transparent about this issue. finally, mr. speaker, there is a question whether everyone, the media, the police, politicians ask taking responsibility in an appropriate manner. i want to express my own opinions directly. i have said clearly, if it turns out andy clauson knew about the hacking of the news of the world, he will not only have lied to me, but he will have lied to the police. he will of course have perjured himself in a court of law. more to the point, if that comes to pass, he could also expect to face severe criminal charges. i have an old fashioned view

about innocent until proven guilty. if it turns out i've been lied to, that would be a moment for a profound apology. in that event, i could tell you i will not fall short. my responsibility are for hire ing him and for the work he did in downing street. of the work he did, i will repeat, perhaps not for the last time, that is work at downing street has not been the subject of any serious complaint. of course he left months ago. on the decision to hire him, i believe i have answered every question about this. it was my decision. i take responsibility. people will of course -- >> i apologize for interrupting the prime minister. the house must come to order and hear in slens silence the remainder of the comment. gentleman people will of course

make judgment about it. with 20/20 hindsight, i would not have offered him the job, and i suspect he would not have taken it. you don't make decisions in hindsight, you make them in the present. you live and you learn. believe you me, i have learned. i look forward to answering any and all questions about these issues, and borrowing this statement, i open the debate. the greatest responsibility i have is to clear up this mess. let me finish by saying this, del are ack sayings of criminal behavior where the most rapid and decisive action is required. there are issues of closeness to media groups. where both labor and conservative have to make a fresh start. there is the history of missed warnings, information commission reports, missed by the last

government, but missed by the official opposition, too. what's the public expect if not petty political point scoring? what they want, what they deserve, is concerted action to rise to the level of events and pledge to work together to solve this issue once and for all. it is in that spirit that i commend this statement to the house. >> i start by thanking the prime minister, mr. speaker, for his statement: .

we are beginning this answers given and responsibilities taken. the prime minister knows that we must do the same as of the country can move forward.

i have a number of questions for the prime minister -- >> the remainder of the prime minister's statement should be heard in silence. order. i say the same to members who are now heckling. think of what the public thinks of our behavior. order. stop it without delay. mr. miller band -- mr. miliband. >> he said he was excluded from the "formal" process, but that does not answer the question. last friday, he revealed that since taking office he has met with representatives of news international and news corp. including james murdoch and

rebekah brooks on more than 20 occasions. can he assure the house that the bid was not raised in any of those meetings or with those organizations? can he say whether at any time he discuss the bid with a counter secretary or any of his officials and discussed with the culture secretary? now let me talk about andy coulson. i was not given specific information that would lead me to change my mind. mr. speaker, the country has a right to expect that the prime minister would have made every effort to uncover information about him to protect herself and his office. the prime minister and those

around him made every effort not to hear the facts about mr. coulson. in the last week, we have become aware of five opportunities for the prime minister or his staff to have acted on specific informations that would surely have led him to change his mind about mr. coulson and all were declined. his chief of staff was told february 2010 that mr. colson had a convicted criminal to workout -- work at "news of teh he world." even rebekah brooks said the decision was extraordinary. in may 2010, the deputy prime minister warned the prime minister about bringing him to downing street. he did nothing. on the september 30th, 2010, "the new york times" "did

multiple sources saying he knew about the hacking at "news of the world." that article was enough to lead the police to open their inquiries and had led to the operation meetings. it triggered the termination of the metro police contract with neil wallis and it led to the offer by mr. yates to be briefed. the question is why? [crowd murmurs] the prime minister was compromised by his relationship with mr. cools and. therefore he could not be told anything at all about his investigation concerning a member of his own staff. he was hampered by a conflict of

interest. the prime minister should not have to rely on briefings. this was a major investigation published by a leading newspaper about the prime minister's director of communication. mr. speaker, they metioned mr. wallis in the publication of the article. what did the prime minister do? nothing. mr. speaker, given a "the new york times" evidence, the public will have expected very loud alarm bells to ring in the prime minister's mind in he did nothing. in october, the prime minister's chief of staff was approached by "the guardian" about this serious evidence that had about mr. coulson's behavior.

once more, nothing was done. mr. speaker, this cannot be put down to gross incompetence. it was a deliberate attempt to hide the facts about mr. coulson. [crowd jeering] [heckling] >> order. members shouting out should not do so. mr. miliband. >> the prime minister, mr. speaker, was caught in a tragic conflict of loyalty that people should expect and his personal allegiance. he made the wrong choice. he chose to stick with mr. coulson. my second question is can he now explain -- can now explain why he failed to act on clear information about what those

around him dribble of silence from the prime minister? the prime minister's conflict of interest had really facts. the metropolitan police commissioner resigned on sunday. the prime minister did not talk about the reasons for his resignation, but the house must. he was trapped. between our own secretary angry and not being told of the hiring of mr. coulson's deputy, mr. wallis. it would never compromised him because of mr. coulson. why did he think that? his own deputy, john yates, had been told by the chief of staff that the prime minister should be told nothing. mr. speaker, this catastrophic error of judgment, hiring him, hanging on to him too long directly contributed the to the

position the problems openly and as a position to resign. does the prime minister accept that is conflict of interest with this put the metropolitan police commissioner in an impossible position? my questions are about bskyb the ignored warnings about mr. coulson, and the met commissioner. there is one other question which matters now. he says that in hindsight he made a mistake by hiring mr. coulson. he said that if mr. coulson lighted to him that he would apologize. mr. speaker, that is not good enough. [crowd heckling] it is not about hindsight or

whether mr. coulson why did to you, it is the warnings that the prime minister ignored. he was mourned the and he preferred to ignore the warnings. in the country needs the leadership that we need. why does he not do more? apology and provide the full apology now for hiring mr. coulson and bringing him into the heart of downing street. >> prime minister. >> stop hunting feeble conspiracy theories. most of that -- i will try and answer every point. first of all, let me think you about what he said about recording parliament and lord levenson and tehe panel.

on most of the other questions, i feel he wrote the questions before he heard. he asked about the issue of bskyb and the cabinet secretary said there was no breach of the ministerial code. you heard the evidence saying there was not one single inappropriate conversation. when it comes to setting up meetings with news corp., i have sat out every morning. he does not go back to the last election. indeed, when will we see the transparency from tony blair and gordon brown? [crowd mixed; cheering and heckling]

the second issue are his questions about andy coulson. >> order. the house is getting excited. we want to listen to what the prime minister has to say. >> he answered -- asked about andy coulson. no one has asked about his conduct at downing street. there is only today one party leader with a news international executive in his office. [crowd heckling] the? he raises about my chief of staff, does he honestly think when it comes to the issue of the proposed meeting with john yates, is he suggesting then he knows better than the chairman, paul stevenson, amps all of these people including people

who worked diligently for tony blair and gordon brown? is he saying they are all wrong and he is right? that shows a staggering lack of judgment. let me just answer the question resignation.l's he said the reasons in detail the evidence and talked about how this situation was different than the one in a number 10 downing street. most questions the asked i have already answered. the parallels with the metropolitan police, answered. media groups, answered. rupert murdoch said, and dii quote, was grodon brown. let us just remember -- let us just remember -- who was the advisor?

>> you are too excitable. we want to hear the answers given by your own prime minister. >> who was the adviser to gordon brown when he was a chancellor? the right hon. gentleman. on the issue of the actions would have taken, let us remember during the last parliament that remarks -- there were ignored, the failure of the police investigation ignored. we now know exactly what which party, if you like, was the slumber party. frankly, mr. speaker, everyone can see exactly what he is doing, an attempt to play this for a narrow partisan advantage. the problem has been taking place over many years. the problem is both of the main parties and the problem is one that the public expects us to stop playing with but to rise to the occasion and deal with this for the good of the country.

>> order. mr. david davis. >> under the previous labor government when my hon. friend was arrested, the prime minister and home secretary were not notified of the details of that investigation. at that time, labour insisted it was at ministerial propriety that they were not told. he has done exactly a public servant should do. >> my right and honorable friend makes a good point. when you read the exchange of emails and see what he said, it was cleared in an advance and he was right. we do not live in a country, thank god, where the prime minister orders to should be arrested and you should not be. >> mr. johnson.

>> the secretary made it 1000 were statement but two words were not mentioned -- neil wallis. his not made iknown of appointment. did he know neil wallis was giving advice to the metropolitan police? >> i did not know that. in the relation to the working did with mr. coulson, i was unaware. one of the issues is frankly the transparency and information ande was about neil wallis the downing street. there is no denying that we employed andy coulson.

thank you for the announcements that you have made. will he now say that he accepts that all governments, from this one back for 20 years have been far too close to the media giant's? it needs to end which means no more back door visits to #10 and that we should be able to not just have a private party political papers, but if necessary cabinet papers, and the recommendation approved others for criminal punishment for illegality. >> i accept the point he makes about transparency. i have said about meetings about business, official meetings, with business executives, but private meetings as well. with relation to rupert murdoch, was declared in the proper way,

and yes it was. in the old way, you would find out that he was waiting for campbell's diaries. we have been very transparent and it goes all the way back including private and official meetings, and i think we need to go further in this regard and it should be the new standard. i say to the right hon. gentleman, why cannot we see right back to the general election? >> thank you, mr. speaker. when the prime minister starts the extensive investigation in "the new york times," what was his reaction? >> the new information that andy coulson new -- knew, he would have lied to a select committee,

the police, and me. i made that position to employ him in good faith. there was no information in that article that would lead me to change my mind about those assurances. [crowd heckling] if it turns out that he knew about backing, that would be a matter of huge regret, great apologies, and a disgrace. it would be something that would be subject to criminal prosecution. >> john whittingdale. >> would my friend agree that what we really care about is the appalling allegations and the propaganda is expressly

felt by thousands of hard- working and honest journalists and thousands of dedicated and courageous police officers. for that reason, it is essential that the investigation be completed as quickly as possible and the judicial inquiry should get under way and completed as quickly as possible. can you give absolute assurance that they will be given the priority they should have been given a long time ago? >> my hon. friend is entirely right. we have to keep the victims of the packing scandal, people who have suffered already, and are made to suffer all over again. the key thing here is the extent and scale of the judicial inquiry. an inquiry into media, malpractice, and of politicians, too, has not been held for many years. it has been talked about and debated, but i want them to get on with their work as rapidly as possible. >> tom watson.

>> mr. speaker, i challenge the prime minister on the accuracy of one of his assertions. he said no one raised andy did in's conduct, and i october of last year after allegations that he had intercepted voicemail messages. i said in the letter that this counteracts the accuracy of this statement and i am still waiting for a reply. >> let me pay tribute to the hon. gentleman in the work that he has done. the point i am making is simply this. spentme that and thy coulson at downing street and the working did it, no one is saying anything against. i said i gave him a second chance after he resigned from "news of the world" because of

what happened under his watch. no one has raised is content to me while he carried out that job. >> thank you, mr. speaker. the prime minister has said that contacts with the medium have been published since the general election. i do not think that is good enough. we need to know the contact the government has had with the last 10 years and we need an investigation into the home office and what have been doing. what's the point i make to the hon. gentleman is that this inquiry is looking at the relationship between politicians and the media at the indeed -- at the behest of this family. frankly, i think we all need to be clear, particularly the two main parties that the level of conduct had been very great and we did spend too much time,

frankly, trying to get on with media companies to get our message across. as a result, we put on the back burner, but the last government, the last opposition, the issues of how to regulate the media. that is the mistake we made. we need to be honest about this. by the way, it is not just the relationship with the news international. does also about the work we do with the bbc or "the guardian." let's be frank and transparent about the meetings we have to learn at lessons and use this as a cathartic moment to sort out the relationship and put it on a better footing. >> i am not sure the prime minister was aware that that bob o'clock this morning -- 5:00 this morning that the home affairs committee pointed out the fact we believe there was a serious misjudgment in the investigation as well as that

news information has intentionally thorton this investigation. he said he took five minutes to look at the file, to realize there was criminality and it was under his nose for four years. he said anyone who has information should handed over immediately and explain why it has been withheld. >> i thank the right hon. gentleman for the work his committee has done. i have not studied all the evidence from yesterday. i did look at the key conclusions this morning and i think the work the committee is going to drill down into the conduct of news international and the police's and valuable. now we have to let the police investigation to get under way, get to the truth, and make sure there are prosecutions as appropriate and let the inquiry get under way. the right hon. gentleman has

played a role in letting that happen. >> does the prime minister share my concern that when involved with a very important issue of phone hacking and when most people in the country are most concerned about what is going on in the eurozone and the impact that might have that the leader of the opposition is so narrowly focused? [crowd hecklint] >> the public wants us to sort this out. they want us to do this on a cross-bodied basis to get on to the other issues that they cared about. everyone has to recognize the problems we face it, difficulties in the eurozone that affect us right here in the u.k., but it fully understand and recognize and will deal with

this before rate move on. >> mr. bradshaw. >> in his conversations with the murdoch's, ms. brooks, and other people, was there ever any mention of the bskyb bid. >> rebekah brooks said there was never a conversation that was held. perhaps he will not be transparent, as he was, about all of the contacts she has had? i have set up the clearest possible position and it is time for you to now did the same thing. >> thank you, mr. speaker. in light of the revelations about how close the relationship was between news international and tony blair and about your meetings at no. 10, does the prime minister agreed this

[inaudible] >> people should not shot down the right hon. lady. it does not reflect either went on conservative or labor. there were a lot of warnings about what was going on. warnings from the informations commissioner, warnings from the select committee, but we did not look him high enough up the agenda the issue of regulating the media. we should not point fingers. we need recognize that we need to work together to get this right and respond to those reports and put those proposals into law. >> my right hon. friend, the chair of the home affairs committee, mentioned it the file

that was sent out by the legal firm. according to gordon macdonald, there is blindingly obvious evidence that police officers were paid by journalists. they are still refusing that to be included and insist on client confidentiality so are buckle and lewis are unable to put in their half of the arguments. the convoluted yesterday and are still refusing to cooperate fully with the investigation. >> the point i would make is that information, if the jermaine, needs to be given to the levenson inquiry. what we need happen now is for the police to go absolutely in pursuit of the truth. if people have been paying police officers, those opposite is the deep prosecuted and the people who did the paying.

it is as simple as that. >> after hearing the evidence given to the home affairs committee, can i warmly welcome what my friend has said today about what shall be given to the victims of the phone hacking including those run separate tragedies. it will take a considerable amount of time for all of those victims to be properly informed. will you make sure they are informed as quickly as possible and that their cases are properly investigated? >> when you have many thousands of people whose bones were -- phones were hacked, it could take too long. there were be conversations with the metropolitan police authority to make sure that adequate resources are put in this. this is already a far bigger investigation to make sure they get to the bottom of this.

>> i welcome the prime minister's decision to widen the terms of reference to include not just the press but broadcasters and social media as well. can i be reassured that it will also include illegal activity such as blogging, hacking into email, and in the interest of the victims that both parties will be open about their extent of their relationship with the murdoch empire? >> on the last point about the relationship with the rupert murdoch and his family, i have been transparent. on the issue of what the terms of reference mentioned, of course the inquiry can look at all of the intermission crimes that have been listed. if you mentioned some forms but not others, no one should be in

doubt that they can go where the evidence leads. >> my right hon. friends agree that after the extraordinary events that the lasting the general public wants to see is cheap partisanship. [crowd heckling] >> let us hear the hon. lady. >> the bogus on andy coulson is ill comign from your party. >> the hon. lady makes a good point and i commend her for questioning what she did yesterday on the committee where she showed commendable plop, if i can put it that way, as well as answering -- asking extremely pertinent questions. [crowd heckling]

>> in the course of the past few minutes, the prime minister has been asked a simple question twice and refused to answer. as prime minister, did he ever discuss the question of the bskyb with the news international at any of the meetings that they held? >> i never had one inappropriate conversation. let me be clear. let me be clear. hear this. i completely took myself out of any decision making about this bid. i had no role in this. that is the point. when the hon. gentleman makes signals like that, i have to say -- >> order. wthe house, again, needs to come to order. the prime minister's answer must be properly heard. go ahead, prime minister.

>> i answered the question. the point, i would say, is on mike the party has been supporting for god knows how many years is that we have set out all of the contacts in start. >> judging the mood of the chamber, this might be an unpopular thing to say, but outside the westminster bubble, i get the feeling that the public has had their fill and they are getting fed up. they want answers about police corruption, acting, answers about relationships between the press and politicians. i think it is time that the frenzy is actually placed on hold. there are other pressing matters that this nation needs to discuss. >> we have a set of the fullest

possible inquiry that was never held under the last government. we need to let that inquiry to find the answers to all of these questions. it looks at police, the media, bskyb, the conduct of politicians. it will last all these questions and we should allow them to get on with the job. >> yesterday, news international's defense seemed to move from "one rogue reporter" to "one rogue lawyer. prime minister, what would you urge them to do now to resolve the situation? >> simple. tell the truth. >> does the prime minister agree that having failed the victims in 2006 when the government

ignored the warnings and having failed the victims in 2009 when the eight hour review missed evidence in the wrong possession that we should not bail them now and i simply apportioning blame. what we need is real reform of the police, media, and politics. >> i think the hon. lady is absolutely right. we can go back over these reports and missed warnings. the inquiry will be able to do that and we should use that information, this once in a generation chance, to try and get media regulation ride. >> this is about confidence. can i ask this question? does he really feel his conduct should inspire confidence in the way that it heats them -- he

[unintelligible] does he not realize the way he has acted has been presorted. -- pretty sordid. >> which government set up an inquiry? this one. which government is being totally transparent about its conduct and contacts with the media and asking others to do the same? that is what this government has done. his government for 13 years had the opportunities and failed to take them. >> would the prime minister agree that in the past when the house of commons has been faced with big issues that they have a tendency for knee-jerk overreactions? would you agree that newspapers are a force for good in this country and we need criminality weeded out of the media but not

impose on a free speech or prepress? >> my hon. friend is entirely right. we need to make sure as the house of commons, as the government, in the debate that we have to show an element of restraint in regulation of the media because there's always a danger that the pendulum will swing too far the other way and we threaten investigative journalism, a strong and independent media that can hold government to account. when we consider some of the scandals that have been uncovered, it is often the press that does this. it is absolutely vital to maintain their british tradition. >> rebekah brooks described the prime minister as a friend and neighbor. we heard about christmas walks and conversations. >> order.

this is the moment in parliament where we have a free speech. this question will be heard. that is the end of it. >> given the review in the last parliament, does the prime minister agree that such informality on his behalf is consistent with what is to be expected? >> what i would say to the hon. gentleman is one thing that came out of the evidence yesterday is that whereas rebekah brooks was indicted six times per your under both former prime ministers, she has not been invited by me. i have set out a great contrast. i have set out all the contacts and meetings i have had in complete contrast to the party opposite. i can say this. i have never held a slumber party or seen her in her

pajamas. [laughter] >> thank you, mr. speaker. [unintelligible] >> order. order. ar, adn thnd the house wants to hear. >> i will start again. the confidence of my constituents in the political process has been undermined and can be traced to the dismal example of politicians in the mid 1990's laying before the altar of media barons. how can we change that culture, addressed the abysmal failure political oversight and leadership, and insure that never again will we sacrifice while those responsible are asleep on watch? >> the short answer is

transparency. i covered this in my speech when we opened the debate, but the best way of making sure relationships are appropriate and the issues of media regulation are for everyone to see how often we need. >> the prime minister has repeatedly emphasized that he has no evidence of any complaint or questions about the conduct of and thy coulson. will the prime minister confirm that one year ago during the time when he was director of communications that the cabinet secretary was alerted to evidence of illegal gun hacking, covert surveillance, and half style media briefing directed against a senior official in the government service? what action, if any, was taken to investigate what appears to be disgraceful and illegal tondo -- conduct?

>> i will look closely and with the gentleman says. i have never seen any evidence to go against this. in time that he worked at no. 10 downing street as the head of communications that there was no complaint about the way he did his job i take responsibility for employing him. i take responsibility for that decision and i have laid out clearly today what i think of that now and all that has been learned. you have to learn lessons you want to move on and get things right in the future. at the time he spends in downing street, he did not behave in a way that anyone felt was inappropriate, and that is important. the decision was to employ him. the decision was his to leave. people cannot point to his conduct and say that was there for a misjudgment. >> many constituents have contacted me about this issue and they join me in welcoming statements. many others have been in touch

concerning other important issues, such as the eurozone. can you assure me that this government is dealing with all of the issues and not focusing on phone hacking? >> the people want us to get on with other issues in a time when we need the economy to grow and provide more jobs. they want to see reforms in welfare and immigration. they want us to deal with these issues, but they want us to get on with many of the issues this country needs to deal with. >> the prime minister is right to say this needs a cross-party response. all of the minority parties need to be consulted, not just the labour opposition. [unintelligible] [crowd heckling] >> we did consult about the

terms of reference and the inquiry. a number of points were made, not all impossible to be included, because sometimes they clashed, so we try to get the balance right. anyone looking at the terms of reference will see that it covers all ground and it sets out an extremely comprehensive and effective inquiry. >> mr. speaker, lost recognizing the disgraceful nature, will they resist the siren calls of petty politics who want to ensure that there will not be a monopoly by the bbc? >> we will come to the issue of media regulation, a plurality, and the power of media honors when we discussed this in the debate. it is important not to leave the bbc out because it is a huge part of the media industry in

the u.k. we want to make sure no media group becomes to our caller has to much influence because will help with the issue about relationship between politics and the media as well. >> thank you for saying will answer all questions. i wonder if i can take him back to the article in "the new york times." he said confirmation in that article could make him change his mind about mr. coulson. you brought it to his attention? to the disgust this with a when he decided that mr. coulson was not involved in? >> this was discussed and debated in the british press as well. let me be clear. all the way through the employment coulson there were discussions about his resignation, what he knew, and the rest of it. i set myself a simple test. if anyone brahmi credible

information that he knew about it, i would have fired him. that is as simple as that. if i would have known, i would not have hired him in the first place. i have tried to be extremely clear about this. the decision and responsibility is mine for hiring him. no one has been able to reproaches conduct. he does not work at no. 10 anymore. the only person who does, it is not in my office. >> putting aside what is appropriate and inappropriate, could the -- [crowd heckling] was bskyb mentioned? >> i had no responsibility for the bskyb takeover and i wias

asked to take myself out because i did not want to be involved. rebekah brooks brooks was quite able to say there was not a single conversation that could have taken place. i know that many people were hoping for some great allegation yesterday to added to their fevered conspiracy theories. i'm disappointed for them that they did not get one. >> as police minister, my experience in briefings was that they did not give you any operational information but they did tell you things that you needed to know. the metropolitan police would understand that. does he really want to be kept in the dark? was he angry?

as a minister, i would be livid officials were keeping informational from me. did the prime minister want to be kept in the dark? >> i have said this in great detail. of course i have regular meetings with senior leaders in the metropolitan police service and embraced on terrorist operations and a cobra. the key issue about my chief of staff emails is that since reading this, paul stevenson, john gates, the cabinet secretary, and the chair of the home affairs committee say that was not our judgment. yates specifically said the offer was, quite rightly, rejected. >> this house, the media, in the country have been rightly focused on the issue. is the prime minister aware that aid agencies are reporting that as a consequence there has been a lack of public awareness

of the drought in somalia and there have been no donations to relief funding? can you assure me in the house that you will spend time looking at those issues as well as this one? >> the matter to which the hon. lady has referred is extremely serious. whenever her strength of feeling about it, this cannot mutate into a general exchange about general matters. >> i thought it was ingenious to get the part in there. the hon. lady is making and in important point which is one reason why i did not want to cancel entirely my visit to africa. it is important to get on with doing the things that britain should be doing in the world whether it is trading with countries like nigeria or leading aid in the horn of africa where today, we have been told it is not just a catastrophe but also a famine. i am proud that nothing is being deflected from the great role we're playing in trying to feed

hungry people. >> mr. speaker, yesterday's evidence session, rupert murdoch was asked about secret meetings with the prime minister and his government in which he replied, "i wish they would leave me alone to." >> one of the outcomes is there will be a lot more of leaving everybody along. >> on "newsmakers," chairman of the democratic caucus offering his feelings on the debt negotiations and what it means for democrats in future legislative efforts. today at 6:00 p.m. eastern on c- span. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2011] >> what would have been sent to me these people if you did not know the ending? >> he follows the life of adolf hitler in the third reich. >> i started looking how to tell

that story in the eyes of outsiders, ideally americans, and that is when i stumbled on the first ambassador not the germany. >> the story of the politics and intrigue in not see germany tonight on c-span's "q&a." >> it takes a behind this? look. it is required tv viewing. it solves mysteries that even nicolas cage cannot conjure. "the library of congress" tonight at 9:00 p.m. eastern on c-span. >> monday was the one-year anniversary of president obama signing the financial regulation act into law. the senate banking committee held a meeting to look at the impact of the measure. witnesses including a chief architect, former house financial services committee chair barney frank.

we will also hear from federal reserve chairman ben bernanke in the hands of several financial agencies. this is just under two hours. >> good morning. to like to call this hearing order. today marks the first anniversary of the dodd-frank wall street reform and consumer protection act. the wall street reform act was a direct response to the worst financial crisis since the great depression. it rated a strong regulatory foundation to protect consumers and investors and help prevent, or mitigate, future prices. i am pleased to have one of the architects of this legislation, representative barney frank, here with us today. i also welcome our panel of distinguished regulators to discuss steps that have taken to

implement the provisions of this important paul to enhance your agency's oversight of the financial services industry. congress must also do its part. s chairman of this committee, i am committed to our rigorous oversight of the implementation process in restoring americans trust in a credible financial system. while it appears that many on wall street, and even some here in washington, have already forgotten the real cost of inadequate financial regulations, i have not and go neither have the millions of americans who lost their jobs, their homes, their savings, and are still waiting for a recovery. unfortunately, these reforms have been under constant attack

since the bill was signed into law. opponents of wall street reform continually repeat misleading claims that the new law was hastily conceived, be overly hard on the economy. one poll released this week show that americans strongly support wall street reform. they want to hold wall street accountable and make the financial system more transparent and enhance oversight of wall street firms that have shown they can put the entire economy at risk. even after hearing arguments supporting and opposing this legislation, and democrats, republicans, and independents support the wall street reform law.

we cannot take that support for granted. since the passage, this committee has taken its oversight responsibilities seriously but to ensure that the regulators are on the right track about the law's provisions. passing the law street reform act was monumental to this achievement. while the regulators have completed maintenance, there is much work left to be done. this will take time and we owe it to the american people to get it right. i think our witnesses again for being here today and i look forward to your testimony. ranking member shall be coming your opening statement. -- member shelby, your statement. -- "the wall streetrnal" -- for

millions of americans, the one- year anniversary provides little comfort as they continued to deal with the harsh economic reality with no innovation, and the growth, and virtually no job creation. the unemployment rate remains above 9% with more than 14 million americans out of work. secretary timothy geithner roche the ed obama administration had expected backing from both sides of the aisle, when the debate began, implying there was not in need. the truth is there was a great deal of agreement on a number of issues, until the white house decided the only issue that mattered was the creation of a massive new consumer bureaucracy. chairman dodd and i agreed to create a consolidated banking regulator with the authorities

of the federal reserve, occ, ots, and fdic would be joined in a single entity. it had the name of the financial institutions regulatory authority. there was strong agreement that the current regulators had failed and radical reform was needed. also agreed to elevate consumer protection, to equal status to provincial regulation. i've proposed, given the company -- given the consumer protection division. we agreed to permit non banks to be supervised and subject to enforcement. we met the administration more than halfway on a number of issues. any hope for a bipartisan agreement evaporated when the word came down from the administration that it was going to be their way or the highway.

a similar dynamic was worked -- was at work in the agricultural committee where senators have agreed on a bipartisan derivatives title, until the former senator from arkansas was told there was not going to be any compromise. secretary geithner also wrote senior republican negotiators on the senate banking committee were not a deal or are unwilling to define a course set of reforms that could support. the first thing the republican members of this committee was to draft a set of four principles to guide our consideration of and regulatory reform. these principles that i have referenced would address all the major issues, including systemic risk regulation, provincial

regulation, consumer protection, and derivatives regulation. also, republicans filed hundreds of amendments, and prior to the bill's markham, we were informed that not a single amendment would receive democratic support. it was their way or the highway. secretary geithner are also wrote a piece, "we have already turned a profit on the tarp investment made in banks." preferencetarp's ability are suspect at best. the tax payers will still takes losses on auto bailout programs. tarp used taxpayer dollars for risky investments. i wish of the terms on any investment must adjust for risk. i believe such a and i wish

would show tax payers were not adequately, kurt -- company -- compensated. what matters most is the long- term impact on the overall economy. on that basis, the record has not been good for american families. since tarp was enacted, the unemployment rate has reached an stayed at record levels, lending remains stagnant, and americans facing foreclosure. secretary geithner took place -- took credit for the banking regulations, as the most important step toward diminishing the risk for future crises. i have been arguing that capital standards have been inadequate, while some bank regulators actively sought to increase bank

capital standards and others remained on the sidelines right here. one of the regulators who did nothing to improve bank capital standards before the last crisis was the president of the federal reserve bank in new york. the new york fed supervisory responsibilities pincus cleave it the largest financial institutions that receive the largest tarp bailouts. who was that president that failed to oversee our largest banks? none other than our current treasury secretary. secretary geithner byrd wrote that the regulators have outlined major elements of reforms to bring oversight transparency and greater stability to the 600 $600 trillion derivatives market. main street businesses had nothing to do with the financial

crisis. dog-francs -- dodd-frank will impose huge costs when they least can afford it. secretary geithner ur said the administration has started the process of winding down freddie mae and -- fannie mae and freddie mark. actually, their shares are increasing. with other government programs, including the federal government now controlling 97% of the market. housing finance reform has not even begun in the congress. secretary geithner claims that the success will depend on making sure that we can write sensible rules that will promote the broader economy. political connected unions and

groups were among the biggest winners under dodd-frank. at contains an assortment of compensation requirements that harms shareholders by empowering special interests and encouraging short-term thinking by managers. 50 years ago president eisenhower admonish us all the guard against the acquisition of unwarranted influence by the defense industry and the pentagon. i am afraid that his words have gone unheeded in this context in that the only thing dodd-frank has accomplished is create an analog to the military- industrial complex. it has created a cottage industry for lobbyists. it has turned the financial regulatory landscape into a nightmare. secretary geithner claims republicans are blocking

nominations they can kill or form. senate republicans have been clearer that the structure of the bureau of consumer financial protection needs to be properly reformed before we consider a nominee to lead it. we have urged the president to adopt three specific reforms. establish a board of directors to oversee the bureau. diversifying the leadership of this powerful fledgling you're saying would ensure that consideration of multiple viewpoints. secondly, subject the bureau to the preparations process to ensure that the bureau has an effective oversight and does not engage in wasteful spending. third, establish a safety check for the provincial regulators. one of the best consumer protections is a safe and a sound bank. i believe the most serving claim

made by the secretary is that republicans for the forces of opposition to reform. the statement reflects the unfortunate view that anyone who does not support their idea of reform must be against any reform. that is nonsense. as i have explained and reiterated, there are numerous areas where republicans and democrats could have easily reached an agreement. unfortunately, the administration decided that there would be no compromise. the result was a bill that this hearing reports to celebrate. i do not believe that the american people are in the mood to celebrate yet. thank you. >> representative frank, i welcome you today as one of the architects of the wall street reform bill. i want to thank you again for all your hard work. i know you have to get back to

manage a bill on the house floor, so please begin. >> thank you. i am glad to be here, and i was struck by the bipartisan tone of the ranking member's statement. he was critical of the bush administration. i might not have anticipated that. as members remember, it was year of 2008 that we were summoned by secretary paulson and chairman bernanke to do the tarp. it was a bipartisan response to that that the judge, was very critical of the tarp. i think he was unfair to the bush administration, but i appreciate the bipartisan nature of his criticism. i would note he said -- secretary geithner said -- rebutted that with reference to

the automobiles. he said it was from the banks. we have not yet recovered the money from the automobiles. ford was not seeking any of the funds, actively supported that. the supply chain would have disappeared. when we talk about enhancing manufacturing, that was the single biggest thing that we did. i would say that the gentleman from alabama's description of the process does not cover what went on in the house. i was not privy to those discussions. it was not a case where the administration told us to go forward. on the consumer bureau, i was the one he said the solution he talked about, namely, elevating

the status bureaucratically of a consumer protection function with in an entity that was primarily a bank regulator would not work. there's a difference between having a regular and having it as one of the things that bank regulators do. the largest singular show of authority to protect consumers that existed before this law was passed was in the federal reserve, and when we questioned the fed, had little to do with it. i would note that i was struck when the senator from alabama talked about it, that he appeared to think that mr. geithner was more important in the bush administration than the president's appointee. he served under ben bernanke, he worked with secretary paulson.

if there is criticism, it goes to all of them. i think it is important that it be independent, that it not be a second thought from the bank regulators, whether one banking regulator or individuals, and i believe that will make a great deal of sense to give the consumer -- the gentleman said let's give them equal status tree you give them an equal entity, subject to others. the bill itself had a common theme. one criticism was that the bill was to create. we probably exceeded the attention span of some members of the congress, but i guess they can wait for the movie. we are dealing with an interconnected system, and we dealt peace mail, and there was a central theme and it was that by sources of liquidity outside

the banking system and by increased information technology, people in the industry have figured out a way to engage in lending while appearing to escape the burden of risk. they appeared to be able to afford risk themselves. is that not all white. it exploded on all of us. done is make people be responsible for their risk. one issue that has come up, and i dealt with this with some of my friends, risk retention. i urge people to look at a book, when people make loans and have no responsibility for whether or not they are repaid -- that is a market incentive. i have been told by my friends in the banking industry, the regulators will tell you what is a good loan and what is not. we are on the markets' site

here. i do not want to depend on the regulators to look at these loans. there are still loans that could be made properly or not, and if you rely on the discretion of the regulators, or t-bill market incentive in attention. if that is the case, for securitization, there's testimony before this committee, it was talked about securitization. that was 1986. if securitization without risk retention, which is not a viable taxation without representation, if that is necessary for there to be a housing market, what were people living in before 1986 proved worth their no loans made before 1986?

i am for an exception for those loans that are solid, but the notion that risk retention is an impediment -- that is where we are the concept. he cannot get insurance without risk retention, and some of my friends are falling into that trap once again. as to derivatives, the law does not mandate any requirement that half of its people who are the users of the commodity in question. it gives full discretion to the regulators to make differences and to focus on that kind of transaction that aip engages in with other institutions. i would add -- if you want me to insert cards, i can do that. one of the things we have done that is and how rebecca cftc,

and if it gets the funding to do this, to deal with speculation. there is a legitimate argument about speculation. it is probably the case that 30 years ago and may not have done so so much. what has happened is there is a greatly increase the amount of liquidity and great sophistication in information technology. if you look at the charts, individual commodities, it tends to be more of a uniform --now it is more individualistszed. there was an investor in the home heating oil business - speculation- does add something to the price of oil. one of the issues is, will the commodities future trading commission exercise the powers we have given it to put limits on people who are not end users,

so we are not trying to -- if you are somebody who never goes to a barrel of oil, if you are that category, we want to limit the amount you can buy, because we are told billions of dollars will be lost if they cannot trade in the financial area. where do those billions of dollars come from? those are two areas. whether or not we deal was speculation and risk retention, that is where i intend to keep pressing. i have thought the business people, and the leading business people last week, and i and a stand people who think we have too much regulation, but the analog is to the pharmaceutical industry, where the major harmaceutical confempanies provide the fda enough money to

carry out. the worst is that regulations on the books and have authorities that are not able to deal with them appropriately. this nickel and diming of the sec and the dftc does grave harm. for people who are prepared to have america a sustaining or, i was encouraged when the gentleman from alabama spoke about the military-industrial complex. we cannot find $150 million for the cftc. the sec, that is an area where there is the tax payer money. fannie mae and freddie mac.

i am impressed with the on- again, off-again nature of this with my colleagues on the house. my republican colleagues in the house talked tough about fannie mae and freddie mac when they were in the minority. when they are in the majority, something happened. they are affected by a strange kind of paralysis. last year when we dealt with this bill in conference, the republicans offered the hensarling bill, as amended. we said it was not germane. we it has been seven months into the session with republicans in the majority. arling is a member of the majority. said. what mr. bauchus

we would like a comprehensive bill. can we get a comprehensive bill? i do not think so. republicans in power in the house are much less certain. where are we? i will say i am somewhat embarrassed by this failure of memory, once he became a member of the majority. the gentleman from alabama blamed the obama administration. i feel like humphrey bogart, when it comes to fannie mae and freddie mac, republicans cannot proceed without obama. why have we not seen that? because of obama will not let them do it. a recent entertainment and elegy was wilson, in which the republicans of the house are geraldine annika obama is the

devil. the chairman said that he was asked by the obama administration to wait. i have checked with the administration. he misunderstood them. no one in the obama toinistration has passeasked hm wait. i have a role that i try to fall myself. no matter how tight the quarter you are in, avoid saying something no one will believe. the notion that they are not acting on fannie and freddie -- esther garrett said it was not a simple problem. the republicans in the house have a bill opposed by everybody who is dealing with the housing market.

that collection of radicals, all disagree with the plan, all think you have to have a more comprehensive approach. the republicans have this problem, their ideology and reality are having a heck of a fight. ideologically, mr. bachus says he cannot do anything until the obama administration lets him. the only time since 1992 that the congress has acted on fannie mae and freddie mac was in 2007, 2008, when i was the chairman, and we got together a bill at the request of the secretary paulson, which president bush signed, which gave the secretary the authority to put them in a conservatorship.

i agree with mr. shelby had too much of the market, but at least it is not that cost on us that it was before. they are behaving in a much more responsible fashion today. mr. chairman, i appreciate this opportunity. >> thank you for coming over here today. the need to get back to the house. senator shelby has a couple -- >> i feel at home here today. i count nine of my former colleagues here. >> a few observations. congressman frank and i have sparred over issues over a number of years. i agree with him that there is a difference between managed risk and speculation. i think we agree on that.

speculation will cause people to get into trouble. managed risk will help people. as far as fannie mae and freddie mac, the congressman knows when we were in control here and i was the chairman, which pushed hard for a reform of fannie and freddie. we got it out of committee. we pushed hard, we will continue to do that. i do not know what is going on in the house. i can tell you, we -- sooner or later, we hope to do something substantive with fannie or freddie. we recognize they are the only game in town as far as -- >> i remember that in 2005 and 2006.

as i remember, your poinopponent was mr. oxley. >> he had a weaker bill. he must have helped him. >> people said i was in the minority. if tom delay was susceptible, we would not have gone to the war in a rock and he would not have gone to the dance show. that was when the republicans were in power, and we work together in 2008. we had cooperation. i think we stopped the hemorrhaging. if you look at the people that president bush put in power, they will tell you the problem we are facing is losses incurred

before it went into conservatorship. since then it has been functioning in a much more conservative fashion. >> i will now call our second panel today. [laughter] we will keep the introductions brief. second panel, please come forward.

i will keep the introductions brief.

mr. wolin is the assistant secretary department of the treasury. ben bernanke is the chairman of the federal reserve system. gary gansler is the chairman of the commodity futures trading commission. marty gruenberg the acting chairman of the fdic. i also welcome you back the senate committee room. mr. john walsh is acting comptroller of the currency of the office of the comptroller of the currency. i thank all of you again for being here today. i would like to ask the witness

is to please keep your marks to 5 minutes. your full written statements will be included in the record. secretary wolin, may begin your testimony. >> i appreciate the opportunity to appear before the committee. one year ago the president signed into law a comprehensive set of reforms for the financial system. were enacted in the wake of the most devastating crisis since the depression. in the depths of the crisis, the economy lost 800,000 jobs per month. credit was frozen. markets were barely functioning. the administration and its predecessors put together a strategy to further pare the system. as a result, the u.s. financial

system today is stronger, or stable, and better able to fuel growth. and ordered to protect our economy and create conditions for prosperity, we needed to put in place comprehensive reform of the financial system. that is why we proposed, congress passed, the president signed into law a sweeping set of reforms. the thought-franc wall street for a consumer protection act make changes to the structure of the u.s. financial system to strengthen safeguards for consumers and investors and to provide better tools for limiting risk in the major financial institutions and financial markets. the core elements of all were designed to build a stronger, more resilience financial system, less vulnerable to a crisis, more efficient in allocating resources. these reforms responsive to the we this is that together brought our financial system to

collapse. they include tougher constraints on excess of risk taking and leverage, stronger consumer protection, comprehensive oversight of derivatives, and they knew orderly liquidation of darby to wind it down a failing financial firm in a manner that protects taxpayers and the broader economy. this that you created three new institutions. the financial stability oversight council to identify, monitor, and respond to threats across the financial system. the office of financial research, to enhance the analysis of financial data to policymakers and the public. the consumer of financial protection bureau, the help consumers make informed decisions and protect them from abuses in the marketplace. we are far along in standing up these institutions, and they had each begun to play their roles. as we move forward, we must

continue to move quickly but carefully, taking the time we need to get things right. we must make sure our efforts are coordinated. we must make sure to take care to regulate firms in matters of her free to the risk posed to the system. we must be sure to work to improve the defect in this of regulation as we write a new set of rules. we must work with partners creigh level playing field with the high set of standards. we must make sure regulators have the funding they need to do their job. a year ago, dodd-frank was enacted. these reforms were an obligation, not a choice. without them we could not build a system we need. a financial system with the stability and resilience necessary to support our economy and to protect it in times of stress. thank you, mr. chairman.

>> thank you. >> thank you for this opportunity to testify. on the anniversary, it is worth reminding ourselves of what congress passed the reforms. the financial crisis was unprecedented in its scope. some of the world's largest firms collapsed or nearly did so, sending shock waves to the financial system. critical markets came under enormous stress. asset prices fell sharply. the crisis in turn wreaked havoc on the economy's causing sharp declines in production and trade. extraordinary actions by authorities around the world helped stabilize the situation, but three years later the recovery from the crisis in the united states and other

countries remains far from complete. in response to the crisis we have seen a rethinking of financial regulation in the united states and around the world. among the core objectives of the effort are enhancing regulators' ability to monitor threats to stability, strengthening both oversight and resolve ability of important institutions, and improving the capacity of financial markets and observed shots. first-come the bett that is an approach that supplement traditional supervision and regulation of individual firms or markets with

consideration of threats to the stability of the system as a whole. the act created a council of regulators to identify and mitigate threats to the stability across a range and markets. the council's monitoring efforts are well under way, and this is created a cost of atmosphere of coordination among agencies. the council is moving forward with responsibilities including rules where it will be able to designate utilities for additional supervisory oversight. for its part the fed has made organizational changes to promote a macro approach. among these changes is the establishment of working groups to oversee the supervision of a large banking firms and

utilities. this has a strong focus on the development that has implications for stability. we have created an office policy and research to help coordinate our efforts to identify risks to the broader system and to serve as liaison with the council. the second objective of the reform is the madigan threats to stability imposed by the too big to fail problem. here in the act takes a two- pronged approach. this includes enhanced risk based requirement, credit limits, stress testing, and remediation regime and activities restrictions. the fed and other agencies face the challenge of aligning regulation with international agreements.

these efforts are going well. the federal reserve and expects to issue rules over site of cfis this summer and we are on schedule to implement basel 3. and being too big to fail requires allowing a cfi to fail. the second part of the act empowers the fed and the fdic to reduce the affect on the system in the event of a failure to tools such as liquidation of authority and approve a resolution planning. the federal reserve is working with the fdic to thecfis prepare for resolution by adopting living wills. the joint rule is expected this summer. reducing the likelihood of a severe crisis requires strengthening the resilience of markets an infrastructure.

toward that end, provisions to improve the transparency and stability of the derivatives market and strength since he th -- strengthens the parts of the infrastructure. we and other agencies are moving this work for in consultation with the corporate foreign regulators. u.s. agencies are working to address structural weaknesses in areas not as easily addressed by the at, such as taconic repo -- such as the repo market. the fed is committed to the promulgation of rules that are sensible, protect smaller community institutions, and promote the sound extension of credit in the service of economic growth and development.

the full transition to the new system will require more work by the public and private sectors, and we will learn lessons along the way. as we work together to implement reforms, we must not lose sight of the reason why we began this process, which is insuring access events like those of 2008 and 2009 are not repeated. thank you. >> thank you, chairman bernanke. german schapiro. >> thank you for inviting me to test a lot -- to testify. following the worst crisis since the depression, congress passed legislation that is reshaping regulatory landscapes, reducing risk, and helping to restore confidence in the system. the ftc was given new

responsibilities, and in past years we have made significant cross -- progress. we have proposed or adopted rules for about 70 of the mandatory provisions that were assigned to us. in my prior testimony, i outlined efforts to establish a process to help us get the rules done right. among our efforts we created internal working groups to coordinate the process and facilitate actions. we increase transparency and sought input from the public. we forged collaborative relationships with other federal and state regulators. we engaged in substantial outreach efforts and group ipated in c

meetings, including investors, academics, industry participants, and reviewed thousands of public comments. all these efforts are helping uswrite rules that protect the financial system without imposing undue burdens on participants. while some feel we are moving too quickly, i believe we are proceeding at pace that ensures we will get the rules right. i written statement illustrates the breadth of the activities that have engaged the sec the last year. other priorities include completing the specialized disclosure rules called for in the act, continuing to establish a new regime for the over-the- counter derivatives market,

strengthening oversight agencies, increasing oversight in important utilities, putting in place new oversight for municipal advisers, in commenting governance an executive compensation requirements, and gauging our foreign counterparts in discussions aimed at limiting potential for arbitrage, and making use of the enforcement powers to address wrongdoing. while the sec made progress, the provisions of the expand the responsibilities and will require significant additional resources to fully implement the law. sec as president of first state of the limitations without additional funding, taking staff from other responsibilities and working without investments in areas such as information technology. while it is incumbent upon us to use resources efficiently, the new responsibilities assigned

are so significant that they cannot be achieved solely by wringing efficiencies out of the existing budget. if he sec not receive additional sources, circumstances that contributed to the crisis will not be addressed. the sec not be able to hire the expertise to please these new areas. i would requires the sec let transaction fees to offset the annual appropriation of the agency, and regardless of the amount upgraded, because it will be offset by fees we collect, it will have no impact on the budget deficit. sec efforts to implement the act had been extensive. we know our work continues. thank you for inviting me to share our progress, and i look forward to answering your questions.

>> thank you. chairman gensler. >> i thank you for inviting me here to testify today, and i am pleased to testify on behalf of the commodities futures trading commission. it is a poor to remember why the law's reform is unnecessary. when aig and lehman brothers failed, we paid the price. all of your constituents pay the price. the effects of the crisis continued to be very real with significant uncertainty in the economy and millions of americans out of work. although the crisis had many causes, it is clear the derivatives marketplace played a central role. they contributed to the product called credit default swaps to a bubble and the housing market,

and helped accelerate as we went into the crisis. they contributed to a system where large financial institutions were all the sudden two interconnected the to be allowed to fail. swaps, which are still important for nt users, also in that moment of crisis concentrated and heightened risk in the financial system. what did the act do to address this? the act for the scope of the oversight of the cftc and for the first time will cover swaps. act promotes market transparency, something that has worked in the markets since the 1930's, and as for real-time reporting of transactions, and bring those transactions to a central place. economists found that transparency reduces costs to

users of markets. the act lowered risk to the public and the economy by regulating the dealers and moving that which we can to a central clearing. the act provides important new cityrcement authorities an agencies can better regulate for abuses. if finalized a rule on manipulation which is similar to what the sec has had for decades. i note the ranking member and , about speculation. congress mandated cftc set position limits for commodities, expanding the scope for swaps. the cftc is working with regulators right rules implement

these provisions of the act. this spring we completed the proposed phase. now the staff and commissioners have turned toward final rules, approving 8 so far. we anticipate taking up rules having to do with her because of these -- having to do with repositories. as we finalize the rules reached out broadly to market participants. this includes of round tables and public comments to consider how best to implement this. we're looking closely at invitation which helps lower costs and rescue it i would like to make note that the cftc taking on an expanded scope, a

market that is seven times the size of what we currently oversee. the commission must be adequately resources to police this market and protect the public. without sufficient funds, there will be fewer cops on the beach, but also when we will not have enough staff to answer the basic questions for market participants and the public. in conclusion, we are working to get these rules right based on public input, but it is more important to get it right then work against the clock, and that is not what we are doing. we're going to get this right and move forward. until the role writing process is done and it lets the rules, the public remains unprotected. i think you and i look forward to your questions. >> thank you, chairman gensler. >> thank you.

members of the committee, thank you for the opportunity to testify today on the anniversary of the passage of the act. chairman johnson, i thank you for your kind words at the outset. it occurs to me that it used to be more comfortable for me to sit behind you than where i am right now. i am privileged to have the opportunity. the act for fighting the fdic with important new authorities in the area of deposit insurance and resolution that we believe will enhance stability and in which we have made progress toward implementation. the act grants the fdic new authorities to manage deposit insurance fund in a way that will make it more resilience in a future crisis. the fdic has implemented provisions of the act that make permanent the increase in the deposit insurance coverage

limits to $250,000 and provides insurance coverage on the entire balance of non-interest-bearing transaction accounts to the end of 2012. we have implemented changes in the assessment based mandate of the act which shifts the overall assessment burden from community banks to the largest institutions which rely less on domestic deposits for funding. the change in the base from deposits that assets will result in an aggregate increase of 30% in deposit insurance assessments for insured institutions with assets under $10 billion. in addition the act provided the fdic with the flexibility in setting the target size of the deposit insurance fund. we have used the new authority to adopt a long-term fund management plan which should maintain a positive deposit insurance fund balance even during a banking crisis this

preserves steady and predictable rates to credit cycles. this will avoid us to avoid -- during a night, downturn. the act provides for a new resolution framework to be used in those instances when we must act to mitigate systemic risk posed by the resolution of a financial company in bankruptcy. the framework includes a liquidation of party and a requirement for resolution plans that will be regulated this -- that will give regulators much better tools. if the act -- if the fdic is appointed as a server eyes as receiver under the authority, we're in are required to carry out an orderly liquidation in a manner that ensures that creditors and shareholders of

perpetrate their losses while maximizing the value of the mineralizingets, hazard. critical to the exercise of this authority is a clear and transparent process. the fdic board approved a final rule lamenting the orderly liquidation of starting on july 6. fiscal rule frame work uses many of the same powers we have used to manage failed bank receiverships. the federal reserve board is working to issue regulations implementing new plan requirements. the comment. -- the comment period ended on june 10. in order to carry out these responsibilities, the fdic has established a new office of

complex financial institutions which will have three key functions. monitor the condition of systemically important financial companies from the standpoint of resolve ability, to oversee jointly with the federal reserve, the root development of resolution plans by this companies, and engage was revised as of foreign operations of these companies in regard to resolution planning. finally, the act contains provisions that will complement the ongoing basel forms that will make capital requirements more uniformly strong. . 171 @ states that capital requirements for the largest banks and holding companies should not be less of the requirements that are applicable for insured institutions. the fdic and the comptroller of the currency finalized a role implementing this provision.

we have made progress, but still have work at a bus. throughout this process we have sought input from the public and continue to report back the progress -- the congress on this progress. we have sought to make this progress as transparent as possible. fe, and i look forward to answering your questions. >> thank you. acting comptroller walsh. >> fayed you. i appreciate the opportunity to discuss the progress toocc other agencies have made in implementing the act in the year since the law was passed. although we have weathered the worst crisis, it will be years before we put all its defects behind us.

the act took steps to guard against future crises, and all of us are determined to implement those safeguards as quickly as possible. occ is involved in 85 projects stemming from the act, including a number of rulemakings will have an impact on the system. our biggest task has been to integrate the functions of the office of thrift supervision, but we have devoted effort to the transfer of supervisory responsibilities to the new cf consumer financial protection bureau. i am pleased to report that on monday said 74 employees of the office of thrift supervision reported for g-i-s at the occ.

have worked to ensure a smooth transition and we have succeeded in moving to a single regulator for national banks. we will need every bit of the talent and experience of former staff to fulfil our mission and the men and women joining us had been fully integrated into policy and field units where their talents can be utilized. we recognize the importance of communication to the industry so that thrift executives know what to expect from the combined agency, and we had 17 outreach meetings and had more than a thousand a sale as join us. we have engaged in rule making this. today we posted a final rule that publishes those regulations that the occ is the authority to administer for. we're continuing to review regulations for those as well as

our own. we we are exploring areas for a continuity of -- after july 21st. that rule making published in today's federal register also addressed the areas where dodd- frank made changes. the rulemaking scales back our current rules and a number of areas. the amendments eliminate the instruct or compare conditions from our instructions. it enhances the authorities for the attorney generals. this also includes consultation

with the -- over the past year, we have provided considerable support. we have worked to ensure cooperation between the occ and the new consumer bureau. in addition to participating in numerous briefings, we have assisted in developing the agency's procurement and personnel management prophesies to ensure the agency has the information it needs about the banks it will be supervising. we executed a memorandum of understanding that allowed us to share reports of examination, information on enforcement matters and other confidential information. we have agreed to provide transitional support, including consumer complaints. we will operate our consumer assistance groups to handle complaints. the bureau builds their own capacity in this area.

as we discussed in our last appearance, we participated in the interagency effort to create an oversight council. the council will be an important venue for averting and addressing future market disruptions. finally it calls for a number of rule making. clearly, we have a great deal of work ahead in implementing many provisions but i'm confident we will get it done in a way that strengthens the financial system and protected against the kind of things that led to the last crisis. >> thank you for your testimony. we will now begin the questioning of our witnesses. will the clerk please put five

minutes on the clock? >> i think it is important to keep in mind the damage inflicted by the crisis and what the wall street reform act will do to prevent or mitigate another crisis. could you highlight in your opinion the crisis and the most important benefits of the new regulatory framework. >> thank you for that question. the cost which i tried to enumerate are extraordinary. the financial system came to the brink of failure, the credit markets froze up. in the end, our economy was affected. there is lost jobs, lost homes and so forth. a reason for all of that is that

we had a framework for our financial system which was manifestly inadequate. we had no alternative but to do that. this does exactly that, it makes sure that our financial system rests on a more stable foundation requiring firms, especially those that are more risky to hold capital and to have greater liquidity standards and leverage complaints. this brought the darkness out of -- this strengthened consumer protection because we know that consumers did not have adequate information and not in a position to make fundamental choices about the kinds of things they undertook. that led to enormous amounts of credit being extended in ways

that they could not bear. the act makes important strides to put the -- to allow the economy to grow which is the critical need we have. >> i have a question directed at chairman bernanke, the acting chairman -- and the acting comptroller walsh. we are concerned about the unnecessary regulatory burdens for the financial institutions that did not cause the crisis. can each of you describe what your agencies are doing to ensure that we have an appropriate set of rules.

>> thank you. we agree that the banks are critical to our financial system. they had the ability to make loans and a local community that large banks do not have. it is very important to minimize the burden on those banks. first of all, blocked itself emphasized that it is very focused on the largest firms and the most complex activities. they made clear to the smaller banks that they are exempt. we are trying in our rules to provide more guidance to the banks about what applies to them

and what does not apply to them. i think that the small banks will benefit that the tougher rules will create a more level playing field. finally i would mention that the fed has made a very strong effort to reach out for smaller institutions. we have created a community bank council that meets three times a year. >> this is a matter of

significant parties. we take very seriously one of the challenges that the community banks have told us about is the number of regulations that are required by god frank. -- dodd frank. we provide a box that specifically symbolizes the availability. we have a quick shorthand place to go to identify the relevance of the regulation. in addition, we have an ongoing policy and a review of the

regulations that requires regular periodic reviews. that is something we are undertaking. finally, i mentioned that we have a advisory committee that has been extremely helpful. this would require are regulated institutions to fill out. in response to that review, we had created a new place which has consolidated everything and this is a single place where they can go. this is a matter of ongoing attention. >> could you elaborate a bit? >> i have certainly joined my colleagues in expressing the

same concerns and in fact the approach we're taking about 2000 of our 2100 institutions. we have substantial out reach. we have an internet-based system that allows them to come and look get updates on regulation and to remain apprised of things that are happening. certainly, they share the concern. they are not sure what affects them and what does not. we continue to work with them to understand those things. >> a thank you. >> thank you. >> it seems to me that after most crises, we're told that if regulators only had more resources, they could have prevented whatever crisis was. as a result, the standard result is to grow the bureaucracies.

dodd-frank fits this pattern. regulators have seen their power is grow. this also will add over 4000 new government jobs, many of them very well paid. the employees at the sec and other agencies can earn up to $230,000 a year. in the meantime, private-sector job growth has been falling. do we have enough government bureaucrats to protect the financial system? >> let me go back to the premise of your question which is -- i believe there is widespread agreement that the regulatory structure before the crisis was inadequate. there was large gaps in our coverage. there was no one responsible for looking at the system as a whole.

there was significant weaknesses in the structure of our financial system. i congratulate you and some of your attention early on to the capital standards and so on. i think that this is a pointless response. i believe that the dodd-frank covers the main basis. you need more people to carry out more regulations and write more regulations. what we want is quality more

than quantity. we want to make sure that there is clarity in terms of the rules. we want to understand the rules of the game so that we achieved these results that releases costs to the financial system. the fed does do regular cost benefit analysis of all of the rules and it is always our intention to try to meet the goals of the statute in the least costly way we can. >> did the inspector general recently called that into question, the cost-benefit? there is methodology that they are using which the claim was antiquated. >> i believe that is correct. there have been several studies won by a group of -- i believe.

minder standing is that the fed took a positive view of the consistent application of cost- benefit principles to the rules we right. >> it is my understanding that the inspector general recently revealed that the fed's internal policy for rulemaking procedures is more than 30 years out of state and therefore does not adequately reflect current statutory requirements to reform cost-benefit analysis. the fed needs to step up to the plate, assuming it is right. >> if that is right, that is a statement about written policies.

we are very attentive to the cost and benefits. >> i have asked you twice in restatements how they would exercise their authority under title 8 with respect to the financial institutions engaged in activities designated under that title. and both instances, you responded with a discussion of the regulation of the financial market utilities which does not answer the question. let me ask you again, what are the plans with respect to financial institutions. what are the plans with respect to the financial institutions. these are engage by the council. >> i thank you for clarifying. i don't think i fully understand the question.

title a has addressed itself to financial markets utilities. i think through the council there will be some that are designated. we currently oversee 16 clearinghouses and some of them will be that. now what is right the council will designate any activities. right now, i would suspect that unless the council somehow does that on activities, we will focus on one, two, three clearing houses. >> they approve rules that laid the groundwork. will the -- provide clarity on whether or not they will allow clearing houses more time

before a day except or reject the rates? >> i think that for most is up to the clearing house and the risk committee. this will have a mandate and it is important that they do it. >> will they let them do it? >> they get to decide and the mandate only happens if we also seek public comment. >> do you think that the ability of the systemically important clearing houses to access the discount window makes it more or less likely that the greenhouses will accept risks or will you try to make sure that they don't? >> i think that it is our responsibility to make sure that taxpayers don't stand behind any financial institution. >> like we stood behind it before. >> i agree. i think the preferred outcome of

the crisis is that we will do more that. i think we should do everything to ensure that the public not stand behind the clearing house. >> thank you, mr. chairman. on tuesday, the chamber of commerce released a report that criticized the federal agencies for not keeping up with markets and technology. chairman shapiro, the house appropriations committee is proposing significant cuts. this is diametrically opposed that this request that you keep up with the markets through technology. >> under the house appropriation, we would probably

cost about $10 million of our information technology budget and the end result would be the postponed investment in technology. i've talked with this committee. it took the two agencies many months to diagnose what happened because of lack of technology if. we're asking me to delay the modernization of the edgar system. we would like to give our staff to hillary to analyze disclosure and also too much of the information that we will be gathering at dodd-frank. also the ability to bring in data as a result of dodd-frank.

another area, the consolidated audit trail. these are moving forward. this requires that we have the capacity to invest in technology and we have not had that and under the house bill, we would not have that. >> technology is very important so that we can be inefficient -- and provide the public protections. we spent this year about $37 million in technology which is now less than most of the financial institutions spend a week. we think it would be helpful to about double that and we have only asked for about 30% more people. technology is a way to be efficient on the people side and

to oversee markets which are about seven times this size. we can aggregate that data and bring it in and use the computers to do that. the house appropriation bill cost us 15%. we cannot do any of that with a cut of 15%. >> this is almost sort of setting you up for not only falling behind these markets we're trying to give but we have a failing and we're not getting any transparency. >> i think that is right. we will complete the writing process. it will be thoughtful. it will be longer than congress laid out. i feel that we won't have the people to answer the questions or have the transparency or to aggregate the market and put it on our website.

public transparency needs the resources. >> we have said that we will not be able to -- of the dodd-frank rules. the other area where we will fall behind is that we receive about 2000 request a year in the reform of the world violence come requests for exemption, no action letters and our capacity to keep up with that kind of volume on a declining budget will be severely impacted. those are the things that the industry really wants. they need that guidance and that relief from time to time. i think that everyone has a stake in these agencies being in a position to do their jobs. >> it seems that this is possibly the worst of two worlds. regulations on the books which were required to.

the ineffective resources to respond to the interpretations of business and to respond promptly to requests. i would think that the business community would be worse off in this situation. again, the liabilities are on the books. they cannot get any traction or response. >> i think that is right. to follow what chairman bernanke said but it is in the interest of the industry to have expert people within the regulatory agencies to can do examinations and provide guidance and provide information.

they're people who regularly avoid following along with the hope that they don't get discovered. i think the vast majority will be laboring to do what they can. getting no help from guidance. >> thank you, mr. chairman. thanks to the witnesses for being back once again. my first question, i would like to direct this to shapiro. you know better than anyone, last year, the fcc developed a whole new set of rules and regulations regarding money- market funds and tighten standards for credit quality and it has liquidity, shortened portfolio. this would reduce the risk that

any run it would likely to occur. we hear discussions that there is also an interest in moving to a floating -- and what concerns me about the net asset value is the complexity of keeping up with the paperwork and even tax implications that could be very complex and onerous to what is a very large and important part of our financial system. my question is, is imposing the net asset value rule, is that still under consideration or is that off the table? >> the -- has taken a lot of interest in the money-market fund issues. as you point out, we did do a complete overhaul of the money market funds. i think that they have been fairly universally apprised of being very very positive and very helpful to the resilience of the money market funds.

we also have the shadow into cheese so investors can become -- to the idea that money does fluctuate. we have discussed these issues several times and we held a round table at the fcc with all our members in attendance and members of the industry and academia to talk about how we prevent runs on money-market funds. i would say that we are actively discussing floating any of these and the ideas that were raised in the president's working group. the industry came forward with the idea of a liquidity exchange bank. there are a number of areas where we're having discussions. i would say nothing has been decided but we continue to seek public input and our regulators and put on what we can do to ensure that we don't have a situation as we did when the

reserve fund broke the -- and caused a run on money-market funds. >> there is an absence that a floating nav would solve the problem. i have a second question. this has to do with the proposed rules for swaps under title 7. my understanding is that these rules would require the subsidiaries of american banks operating overseas and doing business with counterparts that they would nevertheless be required to hold margins on behalf of these counterparts. it is my understanding that the europeans and asians have not imposed a comparable requirement and therefore i am concerned that that would put

our firms at a competitive disadvantage with respect to transactions that don't occur on u.s. soil, upload have an american counterpart. are you concerned that we are heading towards putting ourselves at a competitive disadvantage in this area? >> i thank you for the question. i think not just in the marching area but even more broadly, we have been working with international regulators because capital and risk knows no geographic border. it will move somewhere else on margin. we are trying with treasury which has been part of this. also the federal reserve and the sec to have an international approach to the marketing regimes. i will defer to chairman bernanke because we are only setting margin for the non banks. there is a jurisdiction issue. >> you are absolutely correct. those margin rules for foreign

operations are maintained and europeans and others do not match it, that would be a significant competitive disadvantage. i think the best solution, which we are pursuing with some deciduous this cost that we're pursuing is that we get an agreement on the rules. -- i think the best solution which we are pursuing is that we're pursuing an agreement on the rules. we're working on that. if that does not happen, we would need to think again about how to meet the dodd-frank requirements for improved safety which is what margins are intended to achieve, without causing our banks to have a disadvantage.

>> it seems to me that if we do have a global uniformity, that obviates the need for extraterritoriality in our regulations in the first place. secondly, with respect to margin requirements of end-users, as we all know, that can be disruptive to the end user to hedge risks, and therefore problematic. at the end of the day, it is a credit decision the banks are qualified to make. "at least in what we proposed, the non-bank dealers would not be required to collect or received margin from the non- financial and users -- in users, the non-commercial companies.

>> news reports came out this week from the associated press and reuters that alleged that despite regulators' assurances that rowboats signing was being fixed, the practice -- robo- signing was being fixed, the practice is still widespread both for foreclosed homes and homes that are not in a foreclosure, which amounts to forging documents and in some cases rumpling foreclosure and on people. that is why my colleagues and several members of this committee and a dozen house members as well have written to the occ, the federal reserve, and the fdic, urging that you make the foreclosure reviews and other foreclosure-related documents fully transparent, and that you released the results of those reviews on a bank by bank

basis, so the public can evaluate the performance of each bank. there is a tremendous interest in the public seeing these problems properly resolved. some want to ask those three agencies, the fed, the fdic, and the s.e.c. -- will you release the foreclosure reviews on a bank by bank basis? will you released the access plans that response to problems in the consent orders? what about the engagement letters for the supposedly independent consultants hired by the banks to perform for closure reviews of the banks? >> we are as concerned about these issues as you are. we have issued cease and desist letters. we have told the banks they have to engage independent

consultants. we have been making sure that they are independent, providing supplementary diagnosis over what we have done as well as action plans for the banks. we will be both reviewing those action plans and the conformity of the banks to those plans. our current plan is to provide a report. we will share with you, obviously, the report. that will explain what the findings were and what the proposals were and what the reactions were, and the performance of the banks. >> i am sorry to interrupt you, but i have less than five minutes. i have a specific question. are you going to release those three entities i have asked? >> may i confer with my legal and supervisory teams and get back to you? >> certainly. >> we will certainly be, as

chairman bernanke indicates, releasing more information. i hate to interrupt you, but i have a very specific question. are you going to release the mortgage services action plans, responses and consent orders? are you going to release a foreclosure reviews on a bank by bank basis, and are you going to reduce the letters from the supposedly independent consultants? yes or no? >> we will have to evaluate the individual documents and see if there is anything that would be of a confidential supervisory nature. surely, we will be releasing some indication. >> the fdic is not the regulator of any of the services. it is not within our authority to make that decision. >> let me just say i hope you

understand it is incredibly difficult to create public trust that the companies hired by the banks to perform for closure reviews and already doing business with these banks and future business -- i hope you have a little understanding of that public trust as regulators when you are assuring us the problem of the banks illegally forging documents to foreclose on homes more easily has been fixed, when news reports alleged the problem has not been fixed and is still widespread. i am going to share the congressional research service analysis' i asked for to see if you have the wherewithal to do this. the answer is to synthesize -- that our requests -- regulators have the discretion to release the results on a bank by bank

basis, if they feel it is in the public interest. they can surely come to some middle ground when the release a report with bank by bank results, while still redacting loan-level information that would be confidential to banks. rarely around here do we get 10 measures of the senate -- members of the senate to focus on a specific request for information. a dozen members or so of the house of representatives. i think we need a little transparency in this process. it is about editing. it is about taking and creating transparency, an era of transparency and openness. i am going to be like a dog on a bone on this. i hope we get good answers because otherwise i am going to use every -- every means possible, with my colleagues, to get to the bottom of this. it is not acceptable to violate the law. it is not acceptable to do

robo-signing. it is clear why the law dictates a procedure before you take over someone's cherished -- the biggest asset in their life. that is not being pursued correctly. the agencies responsible for that give us assurances it is, yet public reports constantly suggested is not. i look forward to your response. >> once again, congratulations on your 97-2 win yesterday on the va bill. i want to focus on systemic risk, the central concept behind the legislation, because i am worried throughout much of the crisis that it was triggered by fannie mae and freddie mac because it was loaded with politically connected lawyers and lobbyists, and congress did

not reform it. the institution is pretty much the same cast of rogues, still running, even though it was triggered and you guys were not allowed to touch them. i am worried that so often the government is slow, dead, and innovative, as opposed to the private sector. also, you guys are publicly controlled by us, by the white house, not allowed to look at new risks. one of the risks i am worried about is the government accounting standards board recently proposed that government entities be required to fully disclose unfunded liabilities they face, particularly with regard to pension allocation. in 2009, the pew center published a trillion dollar gap report outlining 21 states that had pension obligations funded

at less than the 80% actuarial requirement recommended. this would be totally unacceptable for the public corporations you are allowed to torture. i am wondering, because systemic risk is now out there, underdog frank in the municipal investment advisers you have, with the s.e.c. now be recommending that municipal debt issuers conform to these requirements? >> if senator, i want to make sure i am on strong legal ground. with enforcement cases -- new jersey and illinois, you allege they were lying to their investors. >> there are a number of others that are still under investigation for failing to do adequate disclosure when they did bond issuances.

we do not have the authority, although we are preparing a report for congress to discuss a number of these issues, to mandate particular disclosure requirements for municipal issuers. we have held round tables around the country to gather the thoughts of municipalities, government finance officers, investors, and others to talk about how we might strengthen the municipal disclosure system, among other things. we are actually having a hearing in birmingham, alabama next week, the home of jefferson county. we continue to work on these issues. i think this was a very important step with respect to the disclosure of the liabilities of unfunded pension responsibilities. but as you pointed out, not everyone is required. >> i hope you would use your systemic risk authority, because i think that is to get out of jail free cards, to look at

threats to the u.s. financial system. i am worried that states are so powerful and politically connected you will hold back. >> i will not hold back. >> i am worried. the other essential concept behind dodd-frank is too big to fail. yet we have seen from 2008 to 2010 is that in 20008, the banks held 11% of all domestic banking issues. in 2010, the top share had grown to 53%. and there were fewer banks. so they are now even bigger and less capable of failing than they were before. chairman bernanke, what can we

do about that? >> senator, you make an obviously important observation. some of the increase in concentration in the last few years was a byproduct of events of the crisis. several medium-sized firms disagree -- disappeared. others were acquired. it is not necessarily a trend. there are other aspects that address too big to fill. -- to fail. there is a concentration rule. we will not approve a merger, for instance. the main concern is that we have much tighter oversight in prudential regulations. one thing we have noticed is that banks and other institutions and do not want to be -- they consider this additional burden is an oversight to constrain them. if it was truly a mark of too

big to fail, they might prefer to be so designated. the other thing which i think is crucial is progress -- in order to get rid of too big to fail, we have to have it fail. we have to have a way for the biggest firms to fail. we heard discussion about fed and fdic work on orderly liquidation authority. i think it will be a sign of success when we see, for example, large firms actually getting themselves smaller to try to get out of some of the oversight. if we see the cost of funding increasing because the backstop to the government is not there, we are not there yet, but i do note that some of the rating agencies have been talking about downgrading large banks based on the possible absence of government support in a crisis. we are not there yet. i think we absolutely must get

there. there are many aspects of dodd- frank, and a lot of work remains, which will help us get rid of too big to fail. >> thank you very much, mr. chairman. i want to add my welcome to the panel of regulators for our country. mr. chairman, i would like to ask the unanimous consent that my brief opening statement be added to the record after the opening statements of the chairman and the ranking member. thank you very much. chairman schapiro, good to see you again. dodd-frank creates the office of investor advocates. it reestablish his the investor advisory committee. i urge you to continue working

to solve -- to get this committee up and running. my question to you is what will be done to ensure that the past and perhaps of the first investor advisory committee will support the work of the investor advocates and the reestablished advisory committee? >> thank you, senator. we are working now to create the new investor advisory committee, having disbanded the prior one. i expect there will be some overlap of committee members, which will give us continuity. the new committee will be fully briefed on the activities of the park committee. the staff that supports the new committee will be largely the same as the staff support for the prior committee. i think we should not have any -- we should not miss a beat in terms of transitioning to our new advisory committee. will we will not have yet is the

new investor advocate. we have sought reprogramming from our appropriators for that. we received an appropriation within the last week. we are waiting for the house to authorize it. once they have done it, we can establish it formally and appoint a person to that position. in the interim, all of the activities are being carried on by other staff. we think of ourselves all as investor advocates. that work is ongoing. >> thank you very much. one important aspect of consumer protection that is sometimes overlooked is financial empowerment. through title 12 of the dog -- dodd-frank act, we ensure alternatives to high-cost

products and services and that protections to oversight are strengthened. will you please update us on treasury initiatives to improve access to mainstream financial institutions and services? >> thank you for that question and for your leadership on this critical issues. from our perspective, the financial access provisions are critical. these are issues we are spending a lot of time working on. we are busy continuing to develop infrastructure for our efforts to support community- based efforts at financial access. we have been working hard at putting together a program called bank usa, which allows us to work with communities to develop programs that will enable access in the communities tabled -- tailored to the particular circumstances in each of those places. our efforts on this will require

some resources, which we have requested and hope we received. we think we have, on the basis of title 12 and work we have been doing in response, an awful lot of things we can be doing. i think you will see in short order from us a further public expression of how we intend to organize and structure our office of financial education and financial access, the important office within the secretary of financial institutions. it will be focused on other efforts in the context of title 12 to continue our work on these critical issues. >> i have a related question for you. but first i would like to congratulate you on your nomination.

the fdic has been a leader in working to improve financial access among un-banked anad u -- and under-banked. do you believe financial inclusion is a function of consumer protection? what more can be done by the fdic in this area? >> the issue of financial inclusion has been a significant priority for the fdic, proposed under former chairman baird and myself. we established a number of years ago an advisory committee on financial inclusion of community leaders, financial institutions, and academics to focus on this issue. at the start, the fdic partnered

with the census bureau on the first national survey ever undertaken by the census on who does not have a bank in the united states, just to get a handle on the issue. the findings of the survey were revealing. it found that about 7% of u.s. households have no relationship with an insured financial institution. nearly another 18% have an account but utilize high-cost non-bank providers of financial services, payday lenders and check catchers. the survey found that about a quarter of u.s. households can be defined as un-banked or under-banked. it is a critical component. the consumer protection -- having an account at an insured institution is the starting point for economic citizenship,

to be able to develop a credit record, bill savings, and become a -- build savings, and become a participant in the economy. it has been a priority for us. we have undertaken initiatives including organizing local partnerships around the country with financial institutions, community organizations, and local government leaders to develop strategies for expanding access to insured financial institutions. we have developed model transaction and savings accounts to encourage financial institutions to provide low- cost services suited to the needs of those without banks. this has been a matter of ongoing attention. it is certain to be a priority going forward. >> thank you very much. >> thanks again to my colleagues and our panel for being here today.

at these hearings we have called for the past two weeks, we have highlighted the need for an enhanced regulatory framework after the financial crisis. there is still work ahead of us, but we are making progress, and it is important we all get this right. the hearing record will be open for seven days for members to submit additional materials and materials for the record.

this hearing is adjourned. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2011] >> a meeting is being called at the white house for 6:00 eastern time with congressional democratic leaders. at the same time, house speaker john boehner continues to work out a debt and that is a proposal to head off the worst government default in u.s. history. he says republicans will act alone if democrats do not go along with what is proposed. the white house is saying

president obama would veto any plan that would extend the nation's borrowing power until 2013. they want to outline a framework of a deal with house republicans. in a phone call that was scheduled a few moments ago, he is trying to craft something to avert panic with asian markets. without an increase in the amount of money the government is -- is allowed to borrow, the country will run out of money on august 2. you can go to c-span.org to view recent press conferences and briefings. >> on "newsmakers," john larson

will talk about the deficit and what it means for democratic lawmakers. >> what would that have been like to have met these people when you did not know the ending? >> eric larson follows the rise of adolf hitler in his latest book. >> i wanted characters through whose eyes i could create those characters. that is when i stumbled upon the first ambassador of nazi germany. >> that is tonight on c-

2012 >> buddy roemer launched his campaign for the 2012 presidential election. this is about 40 minutes. >> we are about to start. i hope this does not mean anything for my campaign. i noticed that the sign said buddy roemer, 1130 -- a 11:30 a.m.

and it said funeral, 12:30 p.m. i do not believe in signs. are we ready? i run to prepare america to create jobs again. beginning with the use of our own tax code to ship jobs overseas. i run to reveal and challenge the control of the special interests over our nation's capital and demonstrates the freedom to lead that can only come from refusing their money. i run as a proud republican, but an even prouder american. i believe in america, its values, its future. we are a nation at risk.

neither the president or any other candidates for this office addresses or has solutions for the two major problems facing america. one, unfair trade, which is stealing our best jobs, stopping economic growth, causing us to slowly sink under a mountain of debt while we attempt to maintain our standard of living by borrowing rather than working. no one mentions unfair trade or a solution for the problem. no one. which leads to the second one mentioned problem. -- unmentioned problem. special interest checks write the tax code,

health care reform, and bank reform. corporate profits are at an all- time high. these same corporations send american jobs overseas causing fear and pain among the families of millions of our neighbors. the guys with the big checks do not want reform or change. they have never had it so good. that is why no one running for president talks about solving either problem. unfair trade stealing our best jobs or institutional corruption of washington, d.c. they need the money to win. i run for president by accepting no pac money, no contributions over $100 per person, and bold disclosure no matter what the size of the gift, $5 or $75. we must break the stranglehold of special interests on a tax

code you cannot read, a budget that will never be balanced, a debt that will never be paid, and the reform of wall street banks that live by their greed and illegal activity, health care reform that does not drive down the costs. and we send american jobs overseas day after day. there is only one way to get control of our country away from the special interests. do not take their pac money, and not take their only want access money. the president must be free to challenge and change washington. our current president, he is raising $1 billion while in office, with much of it coming from wall street corporations and individuals he is supposed to regulate. the price tag $35,000 a ticket.

and too big to fail is still on the books. manufacturing jobs are fewer than 10% in america. made in america is a label that has disappeared. unemployed and under-employed seem permanent now at 20%. we have fewer jobs and they pay less. china is having the greatest boom in history and we are paying for it. we need trading jobs. the trade must be fair or both nations suffer. unfair trade uses child labor, prison labor, work without standards, work without environmental score cards, and empowers the plants that come into their nation. these practices have cost us

millions about our best jobs over the last 20 years, not just the last two. , causing untold paine in america. our leaders have done nothing but -- pain in america. our leaders have done nothing but talk about free trade. trade must be fair first, and then free. george washington protected american manufacturing jobs for more than 160 years. this is not a radical idea. it is what built america. it worked after world war ii for germany and japan. they protected their jobs. now germany is the largest economy in europe and japan is number two unearned. we must protect our best jobs umber 2 onpan is no

earth. we should not have to pay for it. we can protect our critical jobs without the general use of tariffs, which also successful, it tends to be overly-political in their formulation and application. as a first step, as a substitute for that strategy, i would amend the tax code to disallow any tax deductions for expenditures for any goods produced for services located outside of the united states. do not bring up the problem of call centers. companies can still do it. we taxpayers are not going to pay for it. section 162 of the internal revenue code would be so

amendment. i would eliminate the foreign tax code loophole whereby large corporations and wealthy organizations avoid u.s. taxes by moving their businesses and investment out of the country. they are protected as united states' citizens, but they do not pay their fair share of tax for that privilege. example number one, general electric. they made $5 billion in taxes and paid $0 in federal income taxes. this will stop. finally, i would require a fair trade adjustment form to a company imports. this form would show the economic difference necessary to bring the import manufacturing process up to minimum american

standards. this difference would be paid by the importer. unfair trading nations would lose their unwarranted advantage. trade will grow, but it will be fair. these changes will effectively generate millions of american jobs, restoring needed growth in our lagging economy. there is much we need to do. we need to deregulate american business. we need to be energy independent. we need to reduce federal spending for five years consecutively. we need immigration reform that seals the border but allows legal immigration. it is important for america. we need tax reform that lowers

the marginal rate with simplicity. there is much we need to do. the place to start is with the money and unfair trade. no one is speaking about either, no one. we must break be stranglehold of special interest money on our political system so we can break the hold caused by unfair trade by which our best jobs slip away. this growth is essential to paint the debt. we will not do it any other way and get out of the financial -- this financial trap in which we find ourselves. it is the special interests that make their fortune through loopholes and steal our futures. $100 limit. no pac money.

full disclosure. free to lead is the key. no one else can solve these two problems because they need the special interest money. all i need is you. i need 5 million americans out of 310 million to make this happen. stand with me. www.buddyroemer.com. i am no one. a former governor, a former congressman, a successful community banker the returns the politics after 16 years of a happy private life. this is in order to confront the corruption of washington and the loss of our manufacturing base,

so critical to national defense, and the economic health of our great nation. this is a loss of jobs that stems from the unfair practices of some nations and the deliberate manipulation of our tax code by some multinational corporations. i am no one. but i challenge the system. it is corrupt. it is not working. i am 67. i am old enough to know what to do and young enough to get it done. these are times that require bold action and fierce determination. i will do my part, but i have deliberately chosen a path requiring the help of many because that is the way to win. more importantly, that is the

way to get these mighty things done after the election. stand with me against special interests. spread the word. and real changes among us. even with the obvious failure of government to confront on fair trade practices and make america strong, the boys at the top that are living so well have forgotten the rest of america. i have not. i asked the 98% of americans who have never given to a presidential candidate to stand with me. together, we will restore america's promise to our children and grandchildren. free to lead starting in new hampshire where the state motto is live free or die.

it is a good beginning. may god bless america and and each and every one of you. thank you. [applause] i said i would take whatever general questions you have and i can do one on one interviews at the would like. i did not mean to take your breath away. if anyone has a question. [inaudible] >> i think revenue is down because of the facts of the recession. the key to our future is jobs. we need to start growing or the middle class in this country is in deep trouble and the

unemployment rate is permanent and welfare state will be upon us. that is a fact of business. we need to grow jobs. small businesses grow two out of three. that is why i mention the manipulation of the tax code that needs a total reform. unfair trade practices on the part of a few nations not most but a few, we need to take care of business, start growing again, and i think the revenue will be 18.5% of g.d.p. which is adequate. the way to get from here to there in terms of budget for fie consecutive years. take it down from 25% where it is now to slightly under 20%. 1 percent of it g.d.p. is $140 billion. [inaudible]

>> absolutely. we have more loopholes than a same woman or man could read in a lifetime and there is infinite detail to a select few and reward them ultimately for doing nothing. in the case that you raised, the people on wall street, the usual source of these loopholes, can earn four, thought, six times the income of a working man or woman 401k by parking and offshore. there are many loopholes like that. i will work on the tax code the polls to lower the marginal rates. i think we can have the cooperation of a 15% rate, not 36%, but they have to give up their loophole. that is the deal. yes?

[inaudible] >> my view of the problem has left me in the position of waiting for others to address the subject. i have waited now for five, six, 10 years. the money effectively washington grows and no one says a thing. i will tell you one story. money to political candidates with the washington, d.c., addresses, lobbyists, pac's, exceeded the amounts of money contributed by 32 states combined.

we are a nation where 98% do not give one nickel, not one penny. and they are shocked when the 1 or 2% to do own. i did not find anyone who would stand up to it. i have done it all my life. i was the only congressman not to take pac money and i got reelected time after time. if you connect with people on this issue, you will be amazed. i ran against corruption in louisiana and be a governor who never won a race. he spent $15 million and i spend $1 million. it can be done. this will be a war between special interests and me. [inaudible]

>> i like a mall. i will not answer your question. i remember certain tricks of the trade, okay? i will not mention tim pawlenty or someone that i know well and like a lot. i will not mention michele bachmann who is just fascinating to watch hurer. i have friends there and i regret that they have not been able to step back and see the power of money. i think they know the power of money, they are just afraid to run without it. it is the only way. >> white. launching here today? >> it was an accident. my campaign manager, we had wanted to announce this a couple

of weeks ago. we set this week out as the time and dartmouth had an invitation to west to be here most of the day today. this is a great university, and it could not think of a better place to start. when we had been invited by another community in southern new hampshire saw a promise to be there in church there on sunday and maybe have a town meeting. we chose dartmouth because that happened to fit our schedule and it is a great university. >> any plans to relocate here? >> i have already moved to manchester, new hampshire, in a small apartment with one of my sons leaving in the morning to go back to louisiana. i will be desperate and calling you guys for a cup of coffee by the end of the week. i do town hall meetings day after day, i visit with people.

i am learning new hampshire. [inaudible] >> i am not taking any lessons from the past. what i like about new hampshire is live free or die. i saw him reach across the room and say, "john, you are the man." i hope in this campaign that they will look at all of the front-runners with 17% of the vote and they will look at a guy with 2% of the vote and they will say, "i like what he says." that is what i hope for. there is no guarantee. this is an election. [inaudible]

>> that means i was not the right messenger, perhaps to. it could mean a lot of things. i did think about that. excellent question. i do not want to set back a reform movement by failing to achieve my goals. my goals are already being achieved. but there will be more talk about campaign reform over the next two months, i guarantee it, and with me in the race than if i was not. i remember going to i want two months ago and tim pawlenty, newt gingrich, rich santorum were all there. they all endorsed the ethanol subsidies and i was the only one who said we would scrub the budget and that they would be eliminated.

they sucked their breath in, but already, it is the same. now they all say they will eliminate them. the campaign is a variety of things. you can stand on certain issues and make them be the discussion of our times. you can set an example for other candidates and occasionally, in my experience, i can win with a little money, a lot of enthusiasm, and strong principles. i beat an incumbent democratic congressman that way. i beat an incumbent democratic governor that way. i can beat an incumbent democratic president the same way. >> what do you make of no tax budgets? >> they are political. i remember i was running for the constitutional convention in louisiana and i met an old country man. i am not a lawyer.

i am a businessman by trade and practice. you need a lawyer to write the constitution, so i am running in north louisiana and i met an old man who said, "you be careful." i was making commitments about taxes and he told me to be careful. he said his son was in the legislature and he promised he would not raise taxes. he also promised that he would give schoolteacher's the pain that they deserved. his first bill in the legislature was to raise taxes to pay schoolteachers. i think pledges are good, and i think if you believe that you should sign them, but you do not think he will follow, you should not sign. >> i like grover. this is my first day as an official candidate, so i have not seen him.

i will read it first. anybody else? >> free trade practices? >> i am a common sense die. if i were to go to indiana and start a factory employing nine year-old is, i would not think that would be a fair trade practice. i have been to china many times, for example, not to pick on one nation, but like with the family people, hard-working great people, but their government deliberately manipulate their currency, deliberately allows an unfair trade practices and it has to do with age, working conditions. you can see some cities in china and what you are driving toward them 30 miles away and factories are worse. look. i am hoping for trade, but it

has to be fair. we cannot keep giving our jobs away while certain nations, not all, but certain nations abuse their own citizens. maybe we ought to stand up and say, "no more." that is what i call unfair. good question, man. do you want to work on my campaign? just kidding. yes? [inaudible] >> excellent question. excellent question. look. there are a lot of factors at work. we do not make as many as we used to.

i did not say anywhere that i would guarantee jobs. jobs must be efficient and effective. american has lost from a 40% manufacturing base down to 8%. i said 10%, but it is actually 8%. have other countries built up their manufacturing? germany's increased and pay their workers more than we do. why is that? many -- mexico has added manufacturing jobs thanks to bill clinton. why is that? china has increased. japan have increased. they have done it with protract -- protectionist trade barriers after world war ii. technology advancement, work demand changes, product need come the changes will continue and we must be flexible, sweat, and efficient. somewhere, sometime, someplace,

the president of the united states needs to protect our key jobs from unfair competition. i intend to do that. why do not intend to guarantee the number of manufacturing jobs, but it is my belief that if "made in america" becomes important, jobs will come back. [inaudible] >> we followed the treat -- the free-trade philosophy. let the job go where it is cheapest. to hell with working conditions, we just want cheaper goods. i am sure that is important to some americans. why have a different case to make. if competition is sufficient and trade is free and fair that we can compete.

prices might be slightly higher, but if there are 10 million more people working in good jobs, then the country will be better off. i make the case to the american people. we can build cheap, flimsy, and don fehr. look at what it has brought us. are we can do stronger, better things that presidents used to do in america and leaders do this now in germany and japan. i think the only way to get back to real free-trade is to establish, as the gentleman asked, what "fair" means. we will do it. thank you all. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2011]

it is like ron paul with an issue other than the federal reserve bank is about jobs.

>> what do have to say to the people who say the debt ceiling have to be raised right now? >> in a banker, there is truth in what they are arguing, but there is a bigger problem. a wise leader would accept a challenge to reduce spending and get the debt ceiling increase. i look at washington as a circus and those are clowns. they have never run a business or balance the budget. they have no clue what excessive debt does. i will tell you what it does. it shrinks a nation. if you do not believe me, i wonder how the next flight to the manned space center will go. it will not be an american flight. excessive debt shrank say

nation. that was a speech that abraham lincoln gave and he pointed out the louisiana purchase. he had to pay his war debt of belgium. america doubled in size and france disappeared from the new world. there are real consequences to on disciplined spending of our federal government. the clock is ticking -- loudly. i have no confidence they will come to any reasonable settlement which is why i mentioned the 1% reduction in spending. i would start with energy subsidies and the department of and energy. but 71st. i would go from there. [inaudible] politics is not hard. you just need guts. uni the courage to stand by your convictions and quit worrying

about the next election. when you run for president, you cannot go any higher. >> in terms of the short-term decision, what else would you do? >> i would not take the special- interest money. why would kick them out of the room. i would put small business people in the room. they now have to make decisions. we had a meeting in washington in 1982 with an economist from columbia who said the battle of the 21st century will be between china and america. he think america will win because we are innovative and we treat them like dirt. i would go back to january 1st, 2008, and do away with all regulations since then. and we were doing well as a nation.

>> i have a few questions. i am with "the dartmouth." i have questions about your campaign. how do you envision [inaudible] >> i am putting that together. it is the first day of my campaign. we will have a series of town hall meetings with several colleges in a virtual town hall meeting and we will and courage. i started in ohio about one week ago and we're going to the college campuses. this is their future i am talking amount. they can feel the anxiety, the

pain. i think they will be wonderful. watch out, dartmouth. >> what is your fundraising strategy since will not be accepting public interest money? >> i asked everyone i meet, including you, to go on my website and make a contribution. give me a chance. the maximum it would cost to be $100. we accept anything between $5.100 dollars. young students all over america have already started to do that. i do not have a fund raiser, someone in a fancy restaurant. this strategy, every day, every

meeting is a fund-raiser. you just have to do it different. you asked them to bring one friend. if we can get a chain reaction going over the next 30 days, that would work. we have already had contributions from 49 of the 50 states and most people have not heard of me. thank you, jonathan. ok. >> connecticut congressman john larsen, chairman of the democratic caucus offering his perspective on the debt negotiations, entitlement programs, and what this means for a future legislative efforts. "newsmakers" at 6:00 p.m. eastern on c-span. >> what would it have been like to meet these people when you did not know the ending?

>> officer eric larsen follows the rise of adolf hitler and the third reich in his latest, "in the garden of the beasts." >> i started to look through characters. ideally outsiders, ideally americans. that is when i stumbled upon the first ambassador to nazi germany. >> politics and intrigue in germany tonight on c-span's "q&a." >> it takes a behind these taxila. the l.a. times calls it required tv viewing. it solved the mysteries that even nicolas cage cannot conjure. "the library of congress" tonight at 9:00 p.m. eastern on c-span. >> next, a discussion on which nations were considered failed states and how they affect u.s. national security. from "washington journal," this

is 30 minutes. c-span. washington journal continues. >> the fund for peace. here to discuss a series of articles in the july/august 2011 edition. the titles of which include 2011 fail-state index. the state of change where countries have faced a decline. what exactsly is a failed state. can mean many things to many people. most can agree a failed state is one that cannot provide the most basic protections and services to its people. not just in terms of the state itself but a lack of cohesion

and ability to function proper ly the first one is demo graphic pressures and refugees. talk to us about that. four of them social, two economic. the pressures and refugees are two of our social indicators. those focus on really the core of society in many ways. one of the aspects the impact is

had. it appears to displace people as well a country that has massive population shifts across borders to other countries. among the other indicators, we have brain drain. ineastbounding quality, poverty and economic decline. group grievance is really in a country. we are seeing this really within society it could be any number

of society brain drain is really something that effects the country. where a country like india might loose a lot of its educated population to, say, europe or america to pursue higher educati education. we'll finish off those 12 indicators pick any one and talk to us about why it leads to a

failed state. guest: i think one of the most important ones we are seeing is the legitimacy of their state. what we are seeing is that their grorment, their state is the issue. issues such as corruption can hit severely against the indicator. with those in mind, we'll look at the top ten failed states of 2010. somalia, chad, sudan, congo, haiti. zimbabwe, afghanistan, central

african republic and iraq. guest: 2z no accident some of those countries have ended up at the worst end of the index. if you look at somalia, it is a country experiencing next, what does that mean for the wider world. we see there is enormous refugee flows. we've seen in the last couple of decades where there have been significant concerns here in washington about the ability of terrorists to operate due to the lack of governing. that is really why we should care that these states are there

and should really take notice. for anyone who is at all familiar with international affairs, it doesn't take the fail-safe influence. if you see some of those other countries on the list, it's important to do those as well. if it weren't for bringing 240ez issues forward, the public is experiencing serious trouble. the countries are experiencing serious trouble. that's one of the key aspects. we are talking about the 2011 fail-state influence. here to talk with us is

discussions. to get involved in the discussion call 202-624-1111 for republicans. 202-624-1115 for republicans. 202-624-0760 for independents. is it any issue that seven of these failed states are on the african continent. guest: they are experiencing serious pressures. whether it be a lack of effective governing. it could be natural disasters. i think before we lose complete hope in africa, that is not something one should do. we do need to look at countries that are performing quite well.

there are serious troubles in africa but if you look at gambia or other countries they are doing really well. host: our first call comes from colorado on the line for the democrats. caller: i'm calling concerning the failed states around the world. we have a big problem about states failing in america right now. it seems like not raising the debt will affect the whole world now. they don't seem like a party that cares about the world. host: we are talking about the failed states of the world.

caller: good morning, one thing i didn't see in your list of causes and problems in the world is organized religion and the differences it makes between these people and who will support them and who won't. a lot of these nations are not recognized as christian nations which a lot of americans have problems with. we have the problems in the middle east, which again, a lot of those problems carry over into the problems you are talking about. it's funny you represent peace and supposedly these organized religs do. they seem to be the cause of a lot of these wars. i want to know your thoughts on that. host: go ahead. guest: it's an important question probably one that's on the minds of many.

looking at the index, the states closest to fail, generally it's not ruled by religion. you find muslim states near the top, you find christian states near the top. that r i think that caller is hitting on something. other issues. where there are these divides between religion, it can cause serious instability just like other pressures that may exist within society. i don't think we should discount the importance of understanding how religion could lead to conflict. it's one of many thing that's can lead to conflict. a broader conversation might look at how the other splits

will look at proxy's. host: next up is lee in austin, texas. good morning, lee. lee? go ahead. caller: yes, sir. host: you have a question or comment? caller: i'll make it very short for you. thank you for your program. i think you missed one. why wasn't mexico on that list? host: the caller brings up a country that is a great concern to the united states. mexico is on the list. if you are looking at the list on the foreign policy website, it cover the top 60 counties. the full 177 countries on the

fund for peace website. mexico does feature on the larger version of the failed states index. the fact that you will not see it on the abridged version is that mexico ranks 94th. mexico is at 94. i remember a couple of years ago, there was significant amount of controversy here about mexico being called a failed state. i think this really gets to an important aspect of understanding the index and what it means to be a state that is close to failure. if you look at mexico, yes, it's experiencing serious troubles especially with drug trafficking, ultimately the state and society is

functioning. . . . though it country may have issues, the amount that it will bury the state can vary. mexico is quite strong in other aspects, so one only needs to look at how the economy is improving over time in mexico. one can see that drug trafficking is an issue, but it only affects one part of society and regionally, it only affects certain states within mexico, those near the border and on the pacific coast. caller: hi, actually, it's amill. thank you for c-span. i wanted to touch base with our

guest and find out if he has any specific information with regards to you know, if he is actually a country they are looking at. is it close to a failure or not? thank you. host: amill. before you go, there was break up in my microphone. where are you from? caller: camaroone. host: do they say they are failed and do they see problems? what are they relating to you? caller: there are problems but with regards to the economy, it could be better. you know, unfortunately, we have a bunch of folks who are just

out there to steal from the people, you know, in most of the countries in africa. they take money that is, you know, meant for the general public, you know, i mean it's hard, the economy is tough. people are suffering. a bunch of students out of school. universal graduates cannot find jobs. it's a whole mess. the country has a lot of potential. host: emil from virginia and camaroone is 24th on the list. guest: in certainly countries it feels like a country is in trouble. it can feel like it's

experiencing challenges. however, by ranking countries by how much pressure they're experiencing is easy to see how the pressures in the certain country relate. it may seem they are experiencing problems and indeed they are since it's ranked 24th. there are a number of countries in a relative worse position. that's a good way of looking at the index. if i go back to mexico, for example, from the point of view of many people living in the u.s., particularly on the border, may seem that mexico is experiencing certain challenges. but by looking how to ranks in other countries, perhaps those challenges are not as severe as

opposed to other countries. host: before we go back to the phone, cameroon is getting worse? >> it can depend on the economy, changes of government or perhaps natural disaster. there's a number of things that can affect a country's movement. host: back to the phones, corpus christi, texas, daniel, you're on the "washington journal." caller: thank you, i was wondering if your list took into account infrastructure since justice is one of items. in the united states for example, our juris prudential has to be a large factor of our

g.d.p. do you measure that with other countries? guest: i assume you're talking about the judicial infrastructure. that is covered in terms of human rights and how transparent and accountable the judiciary accounts for. whether the justice system is fair and accountable. whether the society has confidence in its function. host: next up camelsville -- no, sorry about that. on our line for republicans. caller: hello. yes.

hello. i'm from kentucky. i'm doing nine. i'm 91 and wanted to make a statement i'm for america 100%. i spend world war ii overseas. i watch the news. we are talking about the other countries. you know, i'm for children 100%. some of these countries have children being brought up in the world, and i never understood why they don't have a plan for children to you know, to not have so many. we did that in my family because we couldn't take care of them. but we had two. now america has changed in my

lifetime. in the 40's and 50's. things were on a stand still. you knew that gas prices were going to be, today, it seems like there's nothing stable. host: we're going to leave it there, w.i., j.j.? guest: i think he touched on something with the failed states and the relationship between youth and live expectancy and where countries rank on the index. we have found there's not a quite perfect, but near perfect correlation, the lowest life expectancy and the countries with the longest life expectancy

and least amount of youth bulge. what i mean by youth bulge is the proportion of the youth population. under 25 as compared to the population as a whole. what we're seeing in a number of countries like egypt for example, there's a massive youth population and that obviously creates pressures on the states. if you look at egypt for example, much of revolution was powered by the youth in many ways. demographic pressures are felt by youth in countries such as egypt. when you have a large youth population. unemployment is an issue. when large numbers of youth are unemployed they are more likely to stay at home living with their parents for much longer. that creates other pressures. so you see the knock on effects of that sort of youth bulge

issue. the other issue is, especially challenging environments in some states where youth are employed in high numbers, you have to look at what are they doing with their time? we have issues of potential criminality. it's definitely an issue and varies country by country. host: next up carol in pahrump, nevada. caller: thank you. good morning. i would like to ask the guest the question of where the united nations in this assistance to these failed states? and especially to the citizens, the people, the children that are dying in countries like somalia. where are the billions of dollars that have gone to the united nations? how they are assisting these failed states.

guest: that's an excellent point. the united nations, i think in many ways, almost a guarantor. we see the serious droughts in the east african region. the international community turns to the world food programs, which is one of large of the institutions we see in the field. without that support, the situation would be incredibly desire. the u.n. in many ways is aligned especially in washington sadly and we see for many countries, the u.n. and its agencies are what stands between serious

changes and obolivian for those countries. host: we are talking to j.j. messner. cincinnati, ohio, jane on our line for democrats. go ahead. caller: my name is jane, i'm in cincinnati, ohio. i called in what you're talking about. your issue today that you're talking about. i feel that all the countries are going to fail if america can't give to them like we are used to giving them and we're not going to be able to evidently because we're going down the tube too. if we go down the tube, everyone will be going down the tube. the point about mexico. they are making it right now nor on the list because they're

selling their drugs. if we want to help everybody in the whole wide world, which we do as democrats, we will help our country out so we will be strong to continue to help out other people host: that's jane in cincinnati, ohio. that ties into an article written by james traub. it says failed states are a threat to the u.s. national security, only some of them. explain that. guest: the analysis has touched on an interesting analysis. basically comparing helpless failed sense versus intentional failed states. the difference is, you look at a

country that doesn't have affective government. then you have a look at a government with an affective government. both are facing serious pressures and at the higher end of failed states index. a state that does not have affective governance over its country maybe a bigger threat to the u.s. or western countries than a state that does have some basic services. if you look at say drug traffickers for example, they actually thrive a little better where there are actually some public services some governance. even drug traffickers need good roads. that gets to an analysis like countries like mexico, south africa that are doing reasonably well. they are in the middle of index but facing serious pressures.

it's partly because criminality, drug trafficking prefers there to be some kind of structure to the states. it maybe dangerous for them to operate in nongovernment spaces. host: there's another premise the united states needs a failed state policy. guest: i think it depend on the country and what the country poses in terms of a threat to u.s. national interest from a u.s. point of view. i think in terms of humanitarian aide and development funding, it's, i think it's often overlooked. in terms of g.d.p. and the amount that the united states spends on international development is not as great as people assume. it's about 2% of g.d.p. spent on

humanitarian aide and development. of course, norway is a smaller country than the united states but spends over 1% on international development and humanitarian aide. if we look at the wars in afghanistan and iraq and international development and humanitarian aide, in terms of that aide, i think the american people and the west as a whole are getting a bargain because the enormous amounts of money that need to be spent when a country does end up on the brink of failure and does pose a very serious and eminent risk to a country is much more expensive than supporting the country and allowing it to grow itself over time. host: we have been talking to

j.j. messner at the fund for peace. you can find out more about their organization at their website. fundforpeace.org and read the 2011 failed country index in >> tomorrow, the former u.s. comptroller general, david walker, offers his solution for the debt crisis. examining same-sex marriage across the u.s. and the decision to overturn the ban on gay men and women serving openly in the military. looking at spending and overspending in the pentagon. "washington journal" live at 7:00 a.m. eastern on c-span.

a meeting has been called at the white house for 6:00 p.m. eastern with democratic congressional leaders. officials say harry reid is and look -- is working on legislation and after to avoid default through 2013. the leader in the house, john boehner, has called the rank- and-file members back to washington earlier and has announced there was no plan but he would be able to offer a framework proposal tomorrow. he had a plan under consideration for about $1 trillion. the bipartisan talks have been stalled after the speaker left negotiations on friday. we will have an update on the negotiations on the c-span network. >> this week's guest, democratic chairman of